Almost half of listed companies now report on Scope 3 emissions, but greenhouse gas emissions are yet to decrease, study says.
This is the outcome of finance research firm MSCI’s latest Net-Zero Tracker. Now in its ninth iteration, the research examines the progress of publicly listed companies on climate change, highlighting trends relevant to investors, such as the adoption of renewable energy, evolving corporate climate goals, and the development of the voluntary carbon market.
The report finds an increase in companies setting science-based climate targets. Specifically, 20% of listed companies have targets that set science-based pathways for aligning their financially relevant GHG emissions with net zero by 2050 while limiting the rise in average global temperature to 1.5 °C. This represents an increase of 8% from a year earlier.
Disclosure of emissions is also on the rise, with two-thirds (60%) of listed companies globally now disclosing their scope 1 and/or scope 2 emissions, reflecting a 16% increase in two years.
Reporting on scope 3 emissions, considered more complex, is also increasing. Nearly 42% of companies report at least some of their Scope 3 emissions, a rise of nearly 17% over the same period.
However, despite improvements in disclosure and target setting, the report finds that listed companies’ actual greenhouse gas emissions haven’t yet decreased, though they appear to be stabilising.
“We estimate that listed companies will produce 11.8 billion tons (gigatons) of Scope 1 GHG emissions this year, roughly the same amount they produced in 2023, or nearly one-fifth of global GHG emissions,” says the report.
“To limit warming to 2 °C, listed companies would need to collectively cap future Scope 1 emissions at 200 Gt of CO2e by 2050,” it continues.
Given the current trajectory, the report suggests that listed companies are currently on a path to 3 °C of temperature increase this century, with only 38% of companies on a 2 °C or lower pathway, including 11% aligned with 1.5 °C.
The numbers stand in contrast with what is required to avert the worst effects of climate exchange. The United Nations Intergovernmental Panel on Climate Change (IPCC) has stated that global GHG emissions would need to peak by 2025 and fall 43% by 2030 to avert the worst impacts of global warming.
The report also examines how voluntary carbon markets are working. These markets are where companies can buy and sell “carbon credits.” Credits are permits to release a certain amount of carbon dioxide (CO2) and allow businesses to offset their emissions by investing in carbon removal opportunities elsewhere.
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According to the results, issuances of carbon credits in the first quarter of 2024 totalled 83.7 megatons (Mt) of CO2e, roughly level with the same period a year earlier.
However, this is likely to change in the coming years. The Science-based Targets Initiative (SBTi) has recently announced a potential for increased role of carbon credits in corporate net zero strategies, stating that “SBTi has decided to extend their use for the purpose of abatement of Scope 3 related emissions beyond the current limits.”
