Addressing climate change will require the largest reconstruction of the global  economy  since  the Industrial Revolution,  according  to  a  report  published  today  by MSCI, a leading provider of services for the global investment community.

 ‘The  Role  of  Capital  in  the  Net-Zero  Revolution’ highlights how capital  markets participants must  be a powerful  and positive force  to urgently drive  the  systemic  transformation needed to  avert  climate catastrophe.  This call to action identifies specific steps that companies as well as owners and managers of capital must take to drive the achievement of a net-zero economy by 2050.

Analysis  by  MSCI  of its All  Country  World  Investable  Markets  Index  (MSCI  ACWI IMI) -a  measure  of approximately  9,000 publicly  listed  companies  across 50developed and emerging markets with  a market  value  of over USD  70  trillion–revealed  those  companies annually emit  an  estimated  11.2 gigatons of carbon dioxide equivalent (CO2e).

MSCI’s model indicates that, without any change to current practices, the annual emissions of these companies could reach16.8 gigatons of CO2eby 2050, leading to a planet that is 3.5C warmer by the end of the century. This trajectory demonstrates the tremendous challenge in reaching net-zero and the urgency to act now.

Therefore, MSCI calls upon:

•    Asset   owners including   sovereign   wealth   funds,   pension funds,   endowments,   insurance companies  and  individuals to  reallocate  capital to  less emission intensive  investments  and to green solutions aligned with accepted warming scenarios; target a year-on-year decarbonization of portfolios that allows for a reduction in the world’s total emissions by 10% a year; and transition to a policy benchmark to help portfolios move toward net-zero

•    Asset managers to use their voting rights and direct engagement with companies to urge them to  align  with  net-zero  targets; support owners  of  capital by building expertise to  fund  clean energy; and develop risk management and reporting expertise in accordance with the guidelines of the Task Force on Climate-related Financial Disclosures (TCFD)

•    Banks to   support   businesses   with   capital to   invent   and   scale clean   energy; and drive developments  in  corporate  lending and corporate  debt  and  equity  issuance  linking  terms  of capital to net-zero objectives

•    Companies to set emissions targets to reach net-zero no later than 2050;articulate credible and specific strategies to achieve these reductions; and incorporate best practices when reporting and disclosing data and initiatives undertaken

Reflective of MSCI’s commitment to support the transparency needed to evaluate the progress of decarbonization, MSCI will publish quarterly the MSCI ACWI IMI Net-Zero Tracker. This report will indicate the aggregate temperature alignment of MSCI ACWI IMI with a 1.5C trajectory, as well as highlight the companies and sectors that have made the greatest progress in the path toward net-zero and identify the world’s laggards. MSCI will consult with market participants to develop and enhance the report over time.

Henry Fernandez, Chairman and Chief Executive Officer, MSCI, said: “On the current trajectory, MSCI  ACWI  IMI will  be  scarcely  greener  in  2050  than  in  2020,  with  an  estimated  80%  of  companies exceeding the emissions budget needed to be well below2.0C. This is not a path to net-zero. Capital markets are an essential and critical force to drive the transition to net-zero with concerted action from all participants, ranging from a reallocation of capital by asset owners, to effective channelling of funds by  asset  managers  and  banks  to  greener  investments  and  innovation, alongside  the  commitment  of companies.

“A global index such as the MSCI ACWI IMI can serve as a measure of the carbon trajectory of the world’s companies.  By  acting  as  the  objective  and  transparent  measure  of  progress, we  can  help  drive accountability, reflect  the  voice  of  the world’s largest investors and identify the companies making progress to power the systemic transformation needed for a net-zero revolution.”

MSCI, as a company, has committed to the goal of net-zero emissions throughout its global operations before2040. MSCI’s transition strategy focuses on reducing emissions through carbon-reduction initiatives and engaging suppliers to achieve shared net-zero goals. – TradeArabia News Service