Capital in the Net-Zero Economy

Capital in the Net-Zero Economy Intro

Capital in the Net-Zero Economy

Owners and managers of capital must play a primary role in achieving a net-zero economy (that is, one that balances greenhouse-gas emissions with an equivalent amount of carbon removal) by the middle of this century. Trillions of dollars in new investment will be needed to change from carbon to clean energy³. Investors can contribute by decarbonizing their portfolios, allocating capital to low-carbon technologies and products, and using their stewardship to encourage companies to set and meet emissions targets. MSCI has identified a series of steps that capital-market participants can take to achieve a net-zero economy. We’ve also detailed our own commitment to achieve net-zero emissions before 2040.

The need to shift course now

The Paris Agreement aims to prevent the most catastrophic effects of climate change by limiting global warming to below 2 degrees Celsius (2°C), ideally to less than 1.5°C, by 2050. The world is very far from reaching that goal, according to the latest calculations⁴.

MSCI estimates that without any change to current practices, the annual emissions of the roughly 9,000 companies in the MSCI ACWI IMI would keep the world on a path toward becoming roughly 3.5°C warmer by the end of this century. As the chart below shows, companies would need to cut their carbon emissions by an estimated 10% annually over the next three decades to achieve the Paris goal.

Historical and potential future trajectories for the world’s greenhouse gas emissions

The chart shows the historical and potential future trajectories of the world’s total greenhouse gas emissions. These figures are measured in metric tons of CO2 equivalent emissions relative to the history of the sum of scope 1 emissions of all MSCI ACWI IMI constituents (without index weight adjustments).

Source: MSCI. Figures are measured in metric tons of CO2 equivalent emissions relative to the history of the sum of direct (scope 1) emissions of all MSCI ACWI IMI constituents (without index weight adjustments).