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Time is ticking down to align with Paris Agreement: MSCI

What’s happening? A new tracker by MSCI, covering around 9,000 companies, has found listed companies must accelerate climate action if they are to align with the targets set out by the Paris Agreement on climate change. The MSCI Net-Zero Tracker shows the annual emissions of listed companies globally is at the same level as 2013. If current emissions are not cut, the budget will be depleted in six years, according to the tracker. (Investment Week)

What exactly is the tracker? The MSCI Net-Zero Tracker displays the collective progress of the listed companies in the MSCI ACWI Investable Market Index. This index covers around 9300 firms representing 99% of the world’s equity universe and accounting for around 19% of global emissions this year. MSCI said the tracker allows investors, firms and regulators to see how the world’s public companies are contributing to total CO2 emissions.

MSCI found companies in the tracker emit around 10.9bn tonnes of direct greenhouse gas emissions annually. This means they have only 5 years and 8 months until they deplete the emission budget required to keep global temperature rise below 1.5C and 21 years and 5 months till they deplete the emissions budget required to keep global temperature rises below 2C.

How accurate are company emissions disclosures? The MSCI tracker also analyses the firms’ reported emissions and compares them with the MSCI’s own estimates in order to examine how accurate disclosures are.

The MSCI made a list of climate disclosure laggards and leaders, and found that 10 of the worst emitters, based on MSCI estimates, had not reported any emissions data as of May 31, 2021. The names on the list are mainly state-backed firms in China or India such as Coal India, China State Construction Engineering and Shaanxi Coal Industry.

The climate disclosure leaders on the MSCI’s list include Airbus, Westpac Banking and the Commonwealth Bank of Australia – however even these leaders fell short of full transparency. Airbus for instance only reported 3% of its emissions, choosing not to report its indirect emissions. Similarly, all the major Australian banks on the list such as Westpac failed to report the indirect emissions they finance.

How can we improve climate-related disclosures? It is clear steps need to be taken to improve the emissions disclosure from firms so we can see how aligned companies are with a 1.5C warming target. More and more countries have been making climate disclosures mandatory and an international framework requiring firms to disclose climate risks may soon be possible.

Growing pressure from investors has also encouraged some companies to improve their emission detection technologies. For instance, Chevron, Shell and TotalEnergies have joined a project that uses GHGSat satellites to monitor methane emissions from offshore oil and gas platforms.

There has also been a growth in technology designed to help companies monitor their indirect (Scope 3) emissions. Emitwise, an AI-backed corporate emissions measuring start-up, streamlines data collection from multiple sources, including travel and workers’ commuting routes, for companies and their suppliers to build a carbon accounting profile.

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Mubaasil Hassan

Sustainable Finance Curator

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