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.