Some progress on decarbonisation trajectories of publicly listed companies

It would appear that more companies are setting science-based climate targets, emissions disclosures are growing, and Scope 3 emissions reporting is also increasing. This is according to the MSCI Net-Zero Tracker, a periodic report on progress by the world’s listed companies toward curbing climate risk from the MSCI Sustainability Institute. This is great news, of course, though somewhat tempered by the actual figures. While the number of companies setting science-based climate targets has increased by 8% since a year ago, it is still only a fifth of listed companies that 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”. Emissions disclosures are growing, with nearly 60% of listed companies globally having disclosed their Scope 1 and/or Scope 2 emissions, an increase of 16 percentage points in two years. And nearly 42% of listed companies reported at least some of their Scope 3 emissions, a rise of nearly 17 percentage points over the same period. Nearly 38% of listed companies have set decarbonisation targets that aim to reach net zero, a one percentage point increase over the same period. Just over half (52%) of listed companies have disclosed an emissions reduction commitment. So there is clear progress, but in most of these cases it is still a minority of companies. And the tracker shows the US is behind, with less than half (45%) of US-listed companies disclosing their Scope 1 and 2 carbon emissions, compared with nearly three-quarters (73%) of listed companies in developed markets globally. However, MSCI said climate disclosure rules finalised by the US Securities and Exchange Commission could help to narrow a global disclosure gap (if they get pass the recently announced judicial review). MSCI explains why all of this is so important: “The data shows that the world is not on track to tackle the climate problem. The decarbonisation trajectories of the world’s publicly listed companies places them on a path to warm the planet by 3°C above pre-industrial levels this century. The aggregate global greenhouse gas emissions of publicly listed companies have continued to rise since the pandemic, yet those emissions would need to peak next year and fall by roughly 7% annually between now and 2030 to avoid the worst effects of global warming.” Talking of the US, shareholders are increasingly vocal when it comes to highlighting ESG risks and opportunities for companies. The latest Proxy Preview 2024 is a comprehensive review of more than 525 ESG proposals submitted by shareholders, issued by non-profit foundation As You Sow, the Sustainable Investments Institute (Si2) and Proxy Impact. As You Sow said it confirms continued faith by shareholders in using proposals to highlight risks and opportunities for companies, despite political efforts targeting ESG more broadly and the rights of shareholders. It notes that the environment is still a chief concern for shareholders, with more than 190 proposals filed, an increase of nearly 20% from 2023. Specific risks include climate change, biodiversity loss, plastic pollution, and vulnerabilities in agricultural supply chains, with a notable increase in farm animal welfare proposals. Social issues, including corporate political influence, workplace diversity, equity, and inclusion (DEI) and human and labour rights – including references to current global armed conflicts and domestic labour foment – make up 52% of this year’s proposals. However, the political backlash against shareholders is central to understanding major themes and discourse surrounding the 2024 proxy season, said As You Sow. “These efforts include the ExxonMobil lawsuit against its own investors for introducing climate-focused proposals; an ongoing House Judiciary Committee investigation targeting shareholders, proxy advisors, asset managers, and banks for alleged antitrust activities; and a significant number of anti-ESG bills being introduced at the state level.” Heidi Welsh, executive director of Si2 and co-author of Proxy Preview, said: “Companies are trying harder to use SEC rules to fight the inclusion of proposals this year, which may mean they feel emboldened by the erosion in support from large asset owners. This has to be seen in the political context. But political theatre doesn’t change the systemic risks capital market players face from climate change and doing business with a diverse, global workforce.”

Some progress on decarbonisation trajectories of publicly listed companies

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