Net Zero Tracker: Listed companies have less than six years left to align with 1.5C goal

The avalanche of net zero commitments from the world's largest companies is yet to translate into deep and sustained decarbonisation, according to a sobering new report from investment research firm MSCI.

The influential analyst house this morning launched a new quarterly Net Zero Tracker, which aims to provide regular updates on how the world's publicly listed companies are performing against the Paris Agreement's goal of limiting temperature increases to 1.5C.

Echoing similar warnings from the likes of the UN and the International Energy Agency, the inaugural edition of the tracker warns time is coming out to move the global economy onto the rapid emission reduction trajectory needed to meet international climate goals.

It found that the world's listed companies collectively emit 10.9 gigatons of direct greenhouse gases every year, as of May 31, 2021 - the same level as they recorded in 2013.

The report calculates that in order to keep within the 1.5C warming threshold set by the Paris Agreement, listed companies have a remaining emissions budget of 61.4 gigatons of carbon-dioxide equivalent (CO2e), meaning that based on current emissions levels the remaining emissions budget is on track to be burnt through in less than six years.

"For the net zero revolution to be successful it is critical for investors, companies, financial intermediaries and policymakers to come together to divert the world onto a path towards a sustainable future," said Henry Fernandez, chairman and chief executive at MSCI. "Despite the rhetoric since the 2015 Paris Agreement, more immediate action is needed. The MSCI Net Zero Tracker is a progress report for whether the world can keep the global temperature rise below 1.5C.  Listed companies and other capital market participants have less than six years to meet that target."

He added that there was now an urgent need for listed companies, investors, and policymakers to work together to accelerate decarbonisation efforts.

"In addition to listed companies taking action to drive the transition to net zero, there needs to be a reallocation of capital by asset owners and an effective channelling of funds by asset managers and banks," he said. "This will help reduce the risks of climate change for the world as we all play our part to avert a climate catastrophe."

The new MSCI Net Zero Tracker assesses the performance of 9,300 publicly listed companies on the MSCI All Country World Investable Market Index.

It reveals a decidedly mixed picture around the world, contrasting the growing cohort of companies that report on their carbon emissions and are developing comprehensive net zero strategies with those offering either partial decarbonisation plans or refusing to disclose their emissions at all.

For example, the report highlighted how a number of well-known publicly listed companies, such as Airbus SE, Baidu, Inc., and British American Tobacco, reported their indirect Scope 3 emissions for the first time in the last year. But it also noted that not all of these disclosures were comprehensive, while some other companies were accused of reporting "only a small proportion of their total direct and indirect emissions".

Meanwhile, Coal India Limited was named as the largest emitter not to report any of its greenhouse gas emissions. 

Remy Briand, global head of ESG and climate at MSCI, said the new quarterly tracker report should help further crank up pressure on companies to provide accurate emissions data.

"The MSCI Net Zero Tracker is bringing a new level of transparency to the climate debate," he said. "It will allow investors to monitor whether listed companies have credible plans to reduce their carbon footprint and track the alignment of their own portfolios with the 2015 Paris Agreement. The data in our inaugural Net Zero Tracker shows the need for a dramatic acceleration in action from the world's public companies. For those not matching their commitments or lagging, there should be nowhere left to hide."