Climate change: Asia-Pacific firms’ emissions could cause Earth to warm by 2.9 degrees, wreak havoc, MSCI says
- Emissions from listed companies in Asia-Pacific are on track to warm the planet by 2.9 degrees Celsius by the end of the century, MSCI says
- Governments’ climate change mitigation commitments made so far could contain global warming to between 2.4 and 2.6 degrees, according to the UNEP
Emissions from listed companies in Asia-Pacific are on track to warm the planet by 2.9 degrees Celsius by the end of the century, almost double the 1.5 degrees needed to avert disastrous consequences of climate change, according to MSCI, the world’s biggest index provider.
This is similar to 2.8 degrees of warming the world is expected to see based on existing policies and committed funding, according to recent estimates by United Nations experts.
Governments, companies and their financiers have to do more to put the world on a sustainable track, analysts said.
“There is some convergence between what we are seeing in our model designed for asset managers, and what global policymakers are producing,” Sylvain Vanston, executive director for climate change investment research at MSCI, said in an interview earlier this week.
“Nonetheless, the new climate commitments from countries globally, if implemented, will lead to more stringent regulations at the local level, which should trickle down to industries and companies, requiring them to make extra commitments.”
As a group, emissions by listed firms in developed markets in Europe, the Middle East and Africa are on course to warm the Earth by 2.4 degrees, compared with 2.9 degrees by those in North America and Asia-Pacific, and between 3.3 and 4.1 degrees in emerging markets, MSCI said in a report on November 1.
The world has already warmed by 1.1 degrees compared with the 1850s before industrialisation took off, according to scientists.
To further lower that to 2 degrees, extra effort is needed so that annual global emissions are slashed by 30 per cent by 2030. To get to 1.5 degrees, the ambition of the Paris global climate agreement aimed at avoiding disastrous economic and social consequences, emissions have to be cut by 45 per cent by the end of the decade.
Similarly, listed companies need to both raise their climate ambition and deliver on targets announced by implementing projects and policies to get decarbonisation results, Vanston said.
Only 36 per cent of the 9,300 constituent firms of the MSCI All Country World Investable Market Index have set decarbonisation targets. Of these, only 46 per cent have declared net zero targets.
And only 41 firms have had their net zero targets approved by the Science Based Targets initiative, which vets them to ascertain their alignment with the 1.5 degrees ambition. The targets of 577 others are pending approval.
Forty-two per cent of the 9,300 firms are listed in Asia-Pacific.
Net zero means residual emissions after vigorous internal reduction effort is fully offset by funding other emitters’ decarbonisation or carbon capture and storage projects.
Investors and policymakers also need to do their part, Vanston said.
“While investors need to hold companies accountable … policymakers need to set mandatory requirements on climate data reporting that is consistent across the globe, enabling investors to then drive significant action,” he said.
Currently, information gaps mean investors and lenders have difficulty spurring companies into acting on decarbonisation in a scientific and timely fashion.
“The [finance] sector’s sluggish recognition of corporate greenwashing is connected to the data gaps in climate disclosure and metrics, and an absence of analytical tools for supporting sustainable financial practices,” according to the 10 New Insights in climate Science report published by Future Earth on Thursday.
If greenhouse gas emission levels are allowed to persist at current levels, there is a half chance that global warming will exceed 1.5 degrees Celsius in nine years, and surpass 2 degrees in three decades, according to the annual Global Carbon Budget report produced by over 100 scientists on Friday.
To reach net zero emission by 2050, global emissions need to be cut by 1.4 billion tonnes each year, similar to the reduction seen in 2020 at the height of the Covid-19 pandemic, said the latest peer-reviewed research paper.
Additional reporting by Yujie Xue in Shenzhen