More companies have committed to addressing climate change but the time frame for limiting global warming is even shorter, according to MSCI ESG's latest Net-Zero Tracker published Thursday.
The report also found that private companies are less carbon intensive than their public counterparts.
Sylvain Vanston, executive director, climate change investment research for MSCI, said in a news release about the tracker report that investors "must address transition risks today or face severe and irreversible physical risks tomorrow."
Investors can use asset allocation, green investments and engagement with boards and policymakers to help companies get on a net-zero path and encourage the necessary regulatory changes, Mr. Vanston said.
In the latest tracker, MSCI projects that public companies will deplete their share of the global emissions budget for limiting the temperature increase to 1.5 degrees Celsius two months earlier than previous projections — by October 2026. Public companies are on a path to warm the planet by 2.7 degrees this century, according to MSCI's "Implied Temperature Rise" metric that analyzes future emissions pathways and current climate commitments.
While more public companies have set decarbonization targets, 44%, compared with 36% last year, only 17% of those targets align with the 1.5-degree Celsuis goal of the Paris Agreement, and only 30% actually aim to reach net zero emissions.
Investors do get more climate disclosure from public companies, the report said, with 35% now reporting Scope 3 emissions related to suppliers or product use, up from 30% last year.
The report found private companies' emissions to be less carbon intensive. "Though it is often considered that carbon intensities may be higher in private markets than in their public counterparts, MSCI's estimates suggest otherwise. Private companies in four of the five most emissions-intensive industry groups are estimated to produce less carbon than their publicly listed equivalents," the report said.
Within the top five industry groups (utilities; materials; energy; transportation; and food, beverage and tobacco), the average estimated carbon intensity for public companies is 76% higher that of private companies, the report said.
