The annual emissions of the world's listed companies remain at the same level as 2013, according to a report from MSCI, which warns that firms have less than six years to get their emissions under control if the world is to avoid the worst impacts of climate change.
At current levels of corporate emissions, said MSCI, the world is due to overshoot the Paris Agreement’s target of limiting global warming to 1.5°C in approximately five years and eight months.
The findings are based on an assessment of the 1.5°C global carbon budget – which refers to the maximum amount of greenhouse gases that can be emitted into the atmosphere while limiting temperature rise to below 1.5°C – and the direct, or Scope 1, emissions of constituents in the MSCI All Country World Investable Market Index (ACWI IMI). The index covers the same markets as the influential large- and mid-cap MSCI ACWI market benchmark, with the addition of small cap representation. It includes approximately 99% of the global equity investment opportunity set, according to MSCI.
According to MSCI, listed companies – which collectively emit nearly 11 gigatons of greenhouse gasses annually – will need to cap future emissions at 61.4 gigatons. This implies an annual emissions limit of 2 gigatons, assuming that economy-wide decarbonisation is achieved in 2050.
Beyond that, without any change in their current annual emissions, companies have 21 years and five months before they use up the emissions budget to limit global warming to 2°C, the other stated target of the Paris agreement, said MSCI. It estimated that companies would need to collectively cap emissions at 233 gigatons – or 8 gigatons annually by 2050 – to meet this goal.
While seemingly slight, scientists say that there is a world of difference between the physical impacts of climate change at 1.5 and 2 °C of warming. It is estimated that 2 °C of warming could expose tens of millions more people worldwide to life-threatening heat waves, water shortages and coastal flooding, compared with 1.5 °C.
In its conclusions, MSCI noted that seven of the the largest 10 emitters with the worst disclosure practices in the MSCI ACWI IMI were Chinese-listed companies, with the remainder coming from India (Coal India), the US (PBF Energy) and Russia (Surgutneftegaz Pao).
Meanwhile, constituents recognised for improved emissions reporting include the Commonwealth Bank of Australia, Norway’s Equinor and Airbus.
However, disclosure of indirect, or Scope 3, emissions continue to be “sparse and highly inconsistent”, said MSCI.
The findings were published today as part of MSCI’s inaugural Net-Zero Tracker report. The Tracker aims to highlight decarbonisation leaders and laggards, and will be published on a quarterly basis going forward.