The world’s listed companies are on track to blow past a greenhouse-gas limit that would restrain global warming to a level that would let humanity avoid the most damaging and costly outcomes of climate change, according to MSCI. In fact, they are hurtling towards the limit at an accelerating pace.
The 9,152 constituent firms of the MSCI All Country World Investable Market Index will by April 2026 use up the “budget” for emissions that would limit warming to 1.5 degrees Celsius above pre-industrial levels, the index provider said in the latest MSCI Net-Zero Tracker report, published on Wednesday.
That is three months earlier than MSCI projected in July.
The report comes ahead of the United Nations-led COP28 global climate summit that starts on November 30 in Dubai, where countries are meant to discuss further mitigation and adaptation commitments.
“Global ambition stagnated over the past year, and national climate plans are strikingly misaligned with the science,” the UN said in a report late on Tuesday.
MSCI’s report provides evidence for that assessment.
China, the world’s biggest emitter, officially aims to reduce emissions at an average annual rate of 0.3 per cent through 2030, but the greenhouse-gas output of its listed companies is projected to increase at an annual rate of 0.5 per cent, the report said.
“The latest [report] reveals that the pace of decarbonisation by global listed companies is expected to slow this decade, while that of their respective home countries is set to accelerate,” MSCI said.
Governments in 13 of the G20 nations – including China, the US and Japan – have set goals to reduce domestic greenhouse gas emissions from the key emitting sectors of agriculture, energy and industry by an average of 4.5 per cent each year between last year and 2030. That is far more aggressive than the 0.8 per cent annual decrease in the five years since the Paris Agreement was forged, the report noted.
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In contrast, emissions by facilities owned by the listed companies are projected to rise 11 per cent year on year in 2023, MSCI said. Those emissions would need to fall by 43 per cent this decade to be consistent with the global 1.5-degree limit.
In 2015, nearly 200 nations adopted the Paris Agreement, pledging action to contain global warming at “well below” 2 degrees and striving to keep it at 1.5 degrees.
The global average temperature already hit 1.2 degrees above the baseline as of January 2021, according to the World Meteorological Organization. And it rose to 1.32 degrees above the baseline in the last 12 months, according to a November 9 report from Climate Central, a US non-profit research group.
MSCI’s assessment is based on public disclosures by the companies of their current emissions and their stated reduction targets, in addition to sector-level emission budgets, said Sylvain Vanston, research fellow at MSCI Sustainability Institute, a new initiative to drive sustainability progress in capital markets.
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“Considering its steepness and current emissions trends, achieving [the 1.5 degree] target is still technically possible but appears extremely unlikely,” he said.
“This would require not just significant technology breakthroughs but also vast and sudden lifestyle changes, as well as, in developed countries, a likely de-growth pattern, which in itself can trigger much economic and social instability.”
Under the current plans of the nations that have made commitments to take climate action, global greenhouse-gas emissions are set to increase 9 per cent by 2030, compared with 2010 levels, the UN said.
This is well short of a 45 per cent decline from 2010 levels needed by the end of this decade to achieve the 1.5 degree goal.
The UN urged developed countries to accelerate their timelines by a decade to reach net-zero emissions by 2040, and for emerging economies to bring forward their targets by one to two decades to 2050.