Listed companies will have used up their carbon budget by 2026, says MSCI

The head of climate research for MSCI has warned that it could become “very difficult to continue saying ‘net zero’ with a straight face” after the data provider’s latest research found listed companies will have used up their collective carbon budget by 2026.

MSCI released its latest Net Zero Tracker today, which concluded that the All Countries World Investable Market Index is burning through its available emissions under a 1.5°C scenario faster than predicted even three months ago. Last quarter, MSCI found that – based on the current rate of direct (Scope 1) emissions – the 9,248 constituents were collectively on track to deplete their budget by early 2027. This has now been cut to December 2026.

“That obviously means that emissions are rising rather than stabilising or, indeed, decreasing,” said Sylvain Vanston, executive director of climate change investment research at MSCI.

“So by 2026, at the current rate of emissions, that budget will have run out and we’ll [either] have to pour a lot more money into climate adaptation because we will enter into the world of runaway climate change […] [or] someone else will have to massively reduce their emissions, like private companies. Otherwise it’s going to be very difficult to continue saying ‘net zero’ with a straight face,” he said.

The report also found that just 16% of issuers in the benchmark align with 1.5°C, using MSCI’s methodology.

“That means that if you’re an investor today and you want to go net zero, you have a very small sample of companies to invest in,” said Vanston. He added that this investment universe would not only be too concentrated for mainstream investors, it would also not be sector-neutral because most firms in energy, materials and automobiles are “strongly misaligned” with the climate goal, while those in insurance, diversified financials and software were more often on a 1.5°C pathway.

More than half of the listed companies assessed still do not disclose their carbon emissions, according to the research. Just over a third (36%) have some kind of decarbonisation target, but less than half of those have established a formal net-zero target.

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