Climate targets are curbing corporate emissions growth – but not fast enough

The Scope 1 emissions of listed companies with SBTi-approved or self-declared net zero targets have gone down or remained stable since 2018 – while those with no target have increased.

According to the latest quarterly report from the MSCI Transition Finance Tracker, the 517 listed firms with SBTi-approved targets reduced absolute Scope 1 emissions by a median 0.5% per year between 2018 and 2023, while the 2,515 with self-declared net zero goals saw these emissions rise by just 0.2%.

In contrast, the 5,657 listed companies that are yet to commit to climate goals saw a median annual increase of 4.2% in Scope 1 emissions in the same timeframe.

The findings confirm the importance of climate targets, especially those verified by the Science Based Targets Initiative (SBTi) in triggering meaningful emissions reductions for companies.

SBTi announced today that it has validated the targets of more than 8,540 organisations to date – 3,000 more than this time last year.

Accountability and granularity in climate targets: Watch CSO Futures' briefing with SBTi

Do climate targets matter? Yes.

“Corporate climate targets matter because companies that are setting ambitious targets need capital to decarbonize their operations. Targets also help investors who are supporting emissions-intensive companies measure the quantity of emissions those companies may be expected to reduce,” MSCI writes in the tracker.

Because investors view SBTi-approved targets as a gold standard, more and more companies are seeking SBTi validation – while the number of firms setting self-declared targets has plateaued. As of June 30, 2025, 18.5%  of listed companies have set a climate target validated by the SBTi, an increase of 6.2 percentage points from a year earlier.

Listed companies’ emissions budget could run out within three years

But despite this increase in robust climate targets, and the positive impact these targets have on companies’ decarbonisation, MSCI calculates that listed companies’ remaining GHG emissions budget is 35 gigatonnes of CO2e for a 50% likelihood of limiting warming to 1.5°C and 112 gigatonnes CO2e for a 50% likelihood of limiting warming to 2°C.

“At this pace, we estimate that the 1.5°C budget of ACWI IMI companies will be exhausted within about three years, which is consistent with recent scientific estimates of the global carbon budget,” the analytics firm adds.

Nearly two thirds of listed firms are on warming paths above 2°C, with a global average of 2.7°C.

This reflects the fact that major emitters such as China (3.8°C) and the US (2.9°C), as well as Australia and Canada, are misaligned with globally agreed targets – with most of their companies following suit. One clear reflection of this lag can be observed in issuances of green bonds, which fell to a five-year low of US$65.7 billion in the second quarter of 2025 – largely led by a drop in issuances in the US, where President Trump’s anti-ESG policies are being felt. 

With national 2035 climate targets (NDCs) due this September, ahead of the COP30 conference in Brazil, MSCI hopes that investors will gain more clarity around transition risks within their portfolios.