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The energy transition is gaining momentum even as the physical risks of a warming world intensify.
Corporate climate ambition is on the rise despite policy headwinds, but companies are still constrained by economies that have yet to decarbonize at scale. China leads in both fossil fuel consumption and clean-tech innovation.
These are among the insights from our Transition Finance Tracker, which examines the latest data through 40+ charts and analysis covering six key themes: greenhouse gas emissions, corporate targets, disclosure, financial flows, the energy transition, and physical risk and nature.
Since 2021, MSCI has been tracking progress by the world’s listed companies to curb climate risk. We’ve renamed our report a Transition Finance Tracker (it was formerly a Net-Zero Tracker) to reflect the breadth of indicators we track amid the growing focus by investors on deploying capital across all assets that can help reduce emissions in the economy while managing a broader set of climate risks and opportunities. This edition highlights those multiple facets.
1. Few companies align with a 1.5°C pathway…
Only 12% of listed companies are aligned with limiting average global temperature rise to 1.5°C (2.7°F) above preindustrial levels. Sixty-one percent project warming of more than 2°C (3.6°F), including nearly one-quarter that could warm the planet by over 3.2°C (5.76°F).
Projected temperature alignment of the world’s listed companies (Implied Temperature Rise in DegC)
Source: MSCI ESG Research, data as of March 31, 2025. Not index weighted.
2… even as corporate ambition continues to rise.
As of March 31, 2025, 14% of listed companies had climate targets validated by the Science Based Targets (SBTi) initiative — up nearly five percentage points from a year earlier. The industrials sector leads in SBTi-validated targets, followed by consumer discretionary and IT.
Share of listed companies with climate targets by target type (%)
Source: MSCI ESG Research, data as of March 31, 2025.
3. Climate transition funds have high carbon intensity… for good reason.
Climate transition funds have a carbon intensity (measured in tons of emissions per million dollars in sales) nearly 5x that of so-called Paris-aligned funds, in keeping with their stated mission of advancing decarbonization by investing in emissions-intensive sectors.
Scope 1 and 2 weighted-average carbon intensity by climate fund type (tCO2e/USDm sales)
Source: MSCI ESG Research, data as of March 31, 2025.
4. Private assets are leaning in.
Private-capital climate funds allocate 40% of their investments to the emissions-heavy utilities sector—compared with just 8% for publicly listed climate funds—as of March 31, 2025.
Sector exposure of climate funds (% assets)
Source: MSCI ESG Research, data as of March 31, 2025.
5. Trade policy poses uncertainty.
Climate funds across asset classes have significant exposure to the U.S., where tariffs could drive up the cost of clean-energy technologies.
Climate fund investment by country (%)
Source: MSCI ESG Research and MSCI Private Capital, data as of March 31, 2025.
6. Emissions and revenue growth have decoupled in advanced economies.
From 2015 to 2023, revenues of listed companies domiciled in developed markets grew 49%, while their emissions fell by nearly 25%.
Revenue and emissions trend of listed companies
Source: MSCI ESG Research, data as of March 31, 2025.
7. Among the three countries that generate the most emissions —
China, the U.S. and India — the U.S. has the least carbon-intensive electricity grid, with 43% of electricity generated from low-carbon sources.
Carbon intensity of electricity, 90-day average
Source: MSCI ESG Research, based on data from Electricity Maps (www.electricitymaps.com) indicating most-recent 90-day average as of March 31, 2025. Note that ratios in the table do not always add up to 100% because the data contains a small share of energy sources marked as unknown.
8. China dominates in both fossil fuel consumption and green innovation.
Chinese-listed companies lead globally in patents for clean-tech innovation, while firms listed in India, Taiwan and China lead in clean-tech revenue growth.
Clean tech innovation leaders (annual growth in high-quality low-carbon patents)
Source: MSCI ESG Research as of March 31, 2025. Notes: Companies shown here derived more than 50% of total revenues from solutions that address alternative energy, energy efficiency or green buildings. MSCI ESG Research’s Low-Carbon Patent Score seeks to establish a picture of the relative level and quality of patents held by companies. Patents receive a score based on forward citations, backward citations, market coverage and Cooperative Patent Classification (CPC)/International Patent Classification (IPC) coverage, based on a universe of roughly 125 million unique patents granted by more than 70 patent authorities worldwide as of October 2024. For more information, see “Climate Value-at-Risk Methodology: Transition Risk.” MSCI Research, Oct. 27, 2024. Client access only. We estimate the compound annual growth rate of Low Carbon Patent Quality Scores based on a time series of the scores.
9. Carbon trading plays an increasingly pivotal role in transition finance.
The voluntary carbon market, which could soon be augmented by trading between countries, is channeling capital from developed to emerging economies and providing private-sector finance for nature.
The 20 largest carbon projects by credits issued, as of 1Q 2025 (tCO₂e)*
* Based on issuances from April 1, 2024 through March 31, 2025. Source: MSCI Carbon Markets, data as of March 31, 2025, based on data from ACR, ART, BioCarbon, CAR, Cercarbono, Climate Forward, CDM (NDC eligible credits only), GCC, Gold Standard, Plan Vivo, Puro Earth and Verra.
10. Climate-related physical risk is rising.
Factories, warehouses, offices and other facilities that belong to companies in cities that include Miami, Osaka, Pune, Sao Paulo, New York and Riyadh are in the top quartile of exposure globally to hazards such as flooding, extreme heat, wildfires, and severe storms.
Areas of physical climate risk to facilities of listed companies
Source: MSCI ESG Research, data as of March 31, 2025, based on MSCI Geospatial Asset Intelligence. For each of the 14 physical hazards covered by MSCI Climate Risk Center’s Physical Risk model, we assess the hazard exposure of over 2M corporate asset locations. The map highlights cities that exhibit exposure to physical hazards in the top quartile compared to the reference dataset (>= 75) for pluvial flooding, fluvial flooding, coastal flooding, tropical cyclones, extreme heat and wildfire.