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The climate action that’s needed is needed in the near term, MSCI’s Net-Zero Tracker affirms

Publicly listed utilities would own an estimated 43% of global wind capacity and just over 15% of solar capacity if society succeeds in tripling renewable energy this decade, the latest edition of the MSCI Sustainability Institute’s Net-Zero Tracker finds.

Wind and solar would account for 29% and 23%, respectively, of the power generation capacity of listed utilities in 2030, according to the report. The estimate reflects a projected increase in global energy capacity needed to achieve a key goal agreed to by nearly 200 countries at the COP28 climate conference, observes the report, which notes that listed utilities own nearly one-third (31%) of power generation capacity globally.

It will be ambitious for listed utilities to achieve those targets. Wind and solar account for an estimated 15% and 6%, respectively, of listed utilities’ current total generation capacity. Coal and natural gas dominate their fuel mix (29% and 34%, respectively) and represent a larger share of current capacity for listed firms compared with the overall global fuel mix, the report explains.

The analysis arrives with the shift to a clean-energy economy at a crossroads. While wind and solar are increasingly replacing coal, oil and gas in the global energy mix, indicators ranging from record heat to the rising costs of extreme weather underscore the urgency of action. Listed companies would use up their share of the global carbon budget for holding warming to 1.5°C (2.7°F), a key threshold for limiting the worst effects of global warming, by July 2026, the report finds.

Comparing installed generation capacity of listed utilities with global capacity

Source: International Energy Agency and MSCI ESG Research

“Listed utilities play a key role in accelerating the shift to a low-carbon economy,” says Linda-Eling Lee, the Institute’s founding director. “The sector contributes a sizeable share of the world’s power and faces growing demand as countries increasingly require more electricity that is generated sustainably.”

Overall, one-fifth of listed companies have published a science-based climate target that would their greenhouse gas emissions to net-zero in line with a 1.5°C net-zero pathway, up eight percentage points from a year earlier, the report finds.

The total includes companies that have obtained validation of their climate plan from the Science Based Targets initiative (SBTi), a key arbiter of corporate climate claims, or that are seeking such approval. SBTi’s standard requires companies to set both near- and long-term net-zero targets that cover all their financially relevant greenhouse gas emissions.

 

Nearly 60% of listed companies disclosed their Scope 1 and/or 2 emissions, while 42% of companies disclosed at least some of the emissions from their value chain, or Scope 3, a rise of 16 and 17 points, respectively, in the two years ended Jan. 31, 2024.

 

The voluntary carbon market readies a reset

The latest edition of the Net-Zero Tracker examines the tie between the need to reduce global emissions this decade and demand for high-quality carbon credits. Voluntary purchases of carbon credits can help companies offset their remaining greenhouse gas emissions that prove most difficult to eliminate and achieve progress toward interim climate targets, observes the report, which also notes the growing use of carbon credits to unlock private investment needed to fund the clean-energy transition in developing countries.

The scalability of voluntary carbon markets hinges on their integrity, stresses the report, which details efforts industrywide to improve the credibility of carbon-credit projects. Those initiatives aim to build trust among buyers, investors and policymakers that credits are funding real reductions of emissions that are quantifiable, permanent and that would not have happened anyway, the report notes.

Companies would need to decarbonize faster if they are to align with global climate goals, according to the report, which notes that the decarbonization trajectories of the world’s listed companies place them on a path to warm the planet by 3°C (5.4°F) above pre-industrial levels this century. Eleven percent of companies are on a pathway to constrain global warming within 1.5°C, while 38% align with a 2°C (3.6°F) temperature rise.

The estimate reflects the latest enhancements to MSCI ESG Research’s Implied Temperature Rise metric. As detailed in the report, the enhancements include adjusting companies’ trajectories by recent progress toward their decarbonization targets and fine-tuning the calculation of companies’ remaining carbon budgets in line with the latest guidance for measuring portfolio alignment published by the Glasgow Financial Alliance for Net Zero and consultation with clients.