Companies targeting net zero needs to urgently accelerate

Listed companies are on a trajectory to cause global temperatures to rise by 2.9°C

Listed companies are doing little to prevent the effects of global warming with just 11% aligned with a 1.5°C temperature rise, MSCI has found.

The latest quarterly Net-Zero Tracker research from MSCI said all listed companies must each reduce their total carbon intensity by 8-10% every year until 2050 if the 1.5°C target is to be met.

Instead, they are on track to put nearly 10.8 billion tons (gigatons) of direct Scope 1 greenhouse gas emissions into the atmosphere this year, up approximately 0.7% from last year. However, this is 5.6% lower than the pre-pandemic high, according to MSCI.

MSCI found an increase in the number of companies setting net-zero targets, but urged groups that do not have these in place to do so urgently as it found only 39% of companies reduced emission intensity by 8-10% between 2019 and 2020.

Sylvain Vanston, executive director of Climate Change Investment Research at MSCI, commented: “The latest Net-Zero Tracker reinforces the magnitude of the challenge in preventing the worst effects of a warming planet. While we acknowledge more listed companies are taking climate responsibilities seriously, the amount of action is still insufficient. 

“The importance of decarbonisation targets should not be underestimated. Setting a net-zero target does not guarantee a company will achieve it, but without one a company is not accountable.

“While there is a steady rise in companies setting these targets, only 45% of 2,900 companies in the MSCI ACWI Index have done so, and this needs to accelerate urgently if the world is to align with 1.5°C.” 

Companies setting decarbonisation and net-zero targets

Source: MSCI Net-Zero Tracker

MSCI also used its Implied Temperature Rise tool to analyse companies and found that less than half (46%) of listed companies align with a 2°C temperature rise, putting them at the high end of the Paris Agreement goal.

Significantly less – 11% – align with a 1.5°C temperature, although this figure is a slight increase from 10% of companies in the October edition of the Net-Zero Tracker.

Public companies are also on a trajectory to cause global temperatures to rise by 2.9°C. Although this is lower than the 3°C scenario reported in October 2021, it is still way off from where companies need to be in terms of carbon reduction.

“A planet that is 2.9°C warmer by 2100 is not just a more volatile world, it is a dislocated world,” Vanston commented.

“‘Disorderly transition’ scenarios are a euphemism for chaos. Every step by companies to cut their absolute emissions and every effort by policymakers to drive momentum is critical because every tenth of a degree matters.”


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...