Scaling solutions: the role of carbon markets in accelerating the net zero transition

The world needs transformational change to fight climate change. And it needs it now.

In 2022, we witnessed flooding in Pakistan, wildfires in Europe, droughts in California and a total of 29 major weather disasters each causing damage of over $1 billion. Clearly, climate change is here, happening and having an impact on us all – the good news, then, is that we are finally seeing broad-based efforts to address this global crisis, not just debate it.

The world is mobilising in the fight against climate change

Despite geopolitical tensions, climate change topped the Bali G20 agenda, forged new dialogue between China and the United States, and has sparked a range of new policy initiatives across the globe, including the US’s Inflation Reduction Act and the European Union’s “Fit for 55” package.

At COP 27 we saw a landmark agreement on loss and damage funding, which put the crucial issue of climate accountability front and centre, resulting in stakeholders around the world having to take a hard look at the environmental impacts of their activities and work out how to address them.

Encouraging progress, but still some way to go

Nowhere is the journey towards addressing climate change more important than in the corporate sector. While recent progress has been encouraging, with 3,152 companies in the MSCI ACWI Index already having made net zero pledges in 2022, compared with 2,891 in 2021, MSCI research shows 54% of companies in the MSCI ACWI Index have no net zero target at all and 64% of listed companies have no decarbonisation target at all.

As investors put ESG considerations at the forefront of their decision-making, disclosure standards are tightening, so bolstering corporate accountability. Today’s companies will however have to move faster to decarbonise and be more explicit about the progress they are making if they are to meet societal and investor demands.

For many, decarbonisation will be a long journey, requiring time to make the wholesale changes required, including adopting new technologies, improving their environmental management capabilities, and fully measuring the range of emissions across their operations and supply chains.

Read more: World Economic Forum