Companies face the heat of the moment

Record heat has pushed temperatures at least temporarily beyond the threshold for preventing the worst effects of global warming. The effects we’ve seen already, including storms on steroids and billions of dollars in economic losses, recently spurred the head of the World Meteorological Organization to sound a red alert to the world.

The commitment made by nearly 200 countries at COP28 was not just ambitious — to transition away from fossil fuels in line with the goal of reaching net-zero emissions — but showed that the next six years will be crucial. Their pledges include tripling renewable energy capacity, doubling energy efficiency and driving methane emissions to zero all this decade.

The latest edition of our Net-Zero Tracker, published on Tuesday, highlights three dimensions of this moment in the shift to a greener, more sustainable global economy, with a focus on action in the near term by the world’s roughly 9,000 listed companies. Here are three takeaways from the report, which you can find in its entirety at the Institute’s website.

Listed utilities will play a pivotal role. Publicly owned power generators would own an estimated 43% of global wind capacity and just over 15% of solar capacity if society succeeds in tripling renewable energy this decade, up from 15% and 6%, respectively today. It will be ambitious for listed utilities, whose generation capacity currently leans more on coal and natural gas (29% and 34%, respectively) compared with the overall global fuel mix.

The data from listed utilities is not easy to parse. As the report details, the targets for renewable energy as disclosed by the world’s most valuable utilities by market capitalization are neither standardized nor comparable. That makes it challenging to track their progress at a time when all other sectors rely on their ability to meet their renewable energy goals.

A mixed picture on corporate climate ambition. The number of companies setting science-based targets is rising. One-fifth of the world’s listed companies have set intermediate and long-term targets that would reduce all of their financially relevant greenhouse gas emissions to net-zero in line with a pathway design to limit the rise in average global temperatures to 1.5°C (2.7°F) above preindustrial levels, up eight percentage points from a year earlier. Still, companies would need to decarbonize faster to align with global goals; companies would burn through their share of the global carbon budget for holding warming to 1.5°C by July 2026, the report finds.

Voluntary carbon markets are readying a reset. With the time for averting the worst warming running out, businesses, investors and governments are all racing to drive decarbonization however they can. Voluntary purchases of carbon credits have a role to play in unlocking climate finance to fund the green transition in developing economies and in helping companies offset their remaining hard-to-abate emissions and meet their interim targets (a key component of industry climate baselines). But scaling voluntary carbon markets will hinge on whether recent industry efforts do in fact improve transparency and credibility that carbon credits represent real emission reduction and removal. Integrity, as the report discusses, is the foundation for future growth.

Thanks to the many colleagues who contributed to the report, which I hope illuminates both corporate climate progress achieved and risks that remain in this decisive decade.