Listed companies two years away from exhausting their 1.5ºC carbon budget

The world’s listed companies could burn through their remaining 1.5ºC-aligned carbon budget by October 2026 – yet 84% of them are yet to commit to net zero.

Just 11% of listed firms have aligned their strategies with a 1.5ºC future, according to the latest MSCI Net Zero Tracker, which looks at corporate climate progress on an annual basis.

About 22% of companies in the MSCI  ACWI Investable Market Index (IMI) have set a science-based decarbonisation target to reduce their GHG emissions to net zero by 2050 – an increase of eight percentage points from last year – but only half of them are aiming to limit the temperature rise to 1.5ºC.

Meanwhile, 84% of firms in the index have yet to make a net zero commitment, and nearly two-thirds of them are on a trajectory that would warm the planet by more than 2°C.

Based on the current level of commitment, listed companies will collectively exhaust their remaining carbon budget under a 1.5ºC scenario (26.4 gigatonnes of CO2 equivalent) by October 2026 – just 27 months from now.

This year alone, they are expected to produce an estimated 10.9 gigatonnes of Scope 1 GHG emissions, though this is down about 7.7% from 2023. 

Apple least aligned with a net zero pathway among Big Tech firms

Part of the MSCI Net Zero Tracker is based on the Net Zero Investment Framework (NZIF) maturity scale, which assesses the degree of alignment with a net zero economy by 2040 to help asset owners and managers analyse alignment of their investments with the low-carbon transition.

The NZIF scale goes from ‘not aligned’ for companies without a commitment to decarbonise in a manner consistent with achieving net zero emissions, to ‘achieving net zero’ for those that have current emissions at or near net zero.

It shows that among the world’s top technology firms by market value (including Apple, Microsoft, Alphabet and Amazon), Apple is the least aligned with a net zero future: the firm has a commitment to be ‘carbon neutral’ by 2030 but is only targeting a GHG emissions reduction of 75%, resorting to carbon offsets and removals to achieve this neutrality.

This strategy is not aligned with the Science-Based Targets Initiative (SBTi) Corporate Net Zero standard, which mandates companies to reduce emissions by 90% before being allowed to offset the remainder.

Listed firms cause environmental damages worth nearly US$4 trillion

Another recent report by S&P Global Sustainable1 and the Capitals Coalition revealed that the world’s largest listed companies caused environmental damages worth US$3.71 trillion in 2021 – equal to more than 4% of global GDP.

The analysis looked at damages caused by the direct operations of more than 12,000 companies in the S&P Global Broad Market Index (BMI), not including their upstream and downstream supply chains. 

Most of these costs (63.6%) are generated by greenhouse gas emissions, as calculated according to the US government’s social cost of carbon value methodology.

GHG emissions are followed by air pollution at 26.2% of overall environmental damages costs – both largely due to the generation of electricity from fossil fuels (especially coal).