Sustainability Pathways

A monthly newsletter for Asset Owners

Welcome to ISSUE 10 of Sustainability Pathways

Asset owners face even more pressure to address their exposure to carbon-intensive investments following the historic commitment at COP28 to transition away from fossil fuels.

A faster energy transition could have big implications for asset values, elevating transition risks for investors. As the latest MSCI Net-Zero Tracker shows, only about a fifth of listed companies globally are currently aligned with a 1.5ºC pathway.

This month’s newsletter features key takeaways from COP28 for long-term portfolios and decarbonization strategies.

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Power to change

The commitment at the COP28 climate summit to phase down fossil fuel use followed a pledge by over 120 countries to triple global renewable energy capacity to at least 11,000 gigawatts by 2030.

For asset owners, this rapid scaling up of clean energy implies new opportunities to invest in green projects and support the decarbonization of both their portfolios and the wider economy. It also means greater transition risk for investors who fail to identify and manage their exposure to climate laggards.

How can asset owners ensure they keep pace with the transition?

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Follow policy. While targets are clear, pathways to get there will depend on national policy. “Country targets on renewables and energy efficiency can be harbingers of upcoming industrial and fiscal-policy incentives for investors to look out for,” notes MSCI’s Mathew Lee.

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Act on the data. New reporting requirements in line with the International Sustainability Standards Board are set to improve the availability of climate-related data. Asset owners may be able to capitalize on new opportunities by acting quickly on improved disclosure, but they also need to be aware that disclosures are not uniform across the globe.

»	Read our Sustainability and Climate Trends to Watch for 2024 report for more on disclosure trends..

Data as of October 2023. Source: MSCI ESG Research

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Keep an eye on carbon. Putting a price on carbon emissions could divert trillions of dollars annually to fighting climate change, says IMF head. Carbon markets are aiming to do just that, with a flurry of announcements during COP28 to enhance the credibility of carbon trading.

»	See how carbon credits can help incentivize 1,000 firms to meet corporate climate targets in the latest research from MSCI Carbon Markets.

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Stay ahead of nature solutions. Biodiversity is the next climate frontier, as highlighted in the closing COP28 agreement. With both the US and China signing on, asset owners could be set for a sea change in policy and investment opportunities.

»	Assess biodiversity-related risks in APAC. Uncover how land use, pollution, and water stress by companies in APAC impact biodiversity-rich areas.

Learn more →

Events

2024 Sustainability & Climate Trends to Watch – The APAC View

Join the webinar on February 27th to hear the key and emerging trends that might potentially shape the financial industry going forward.

Clarity Drives Action

Will 2024 be a year of innovation, transformation, or uncertainty? MSCI’s Sustainability and Climate Trends to Watch highlights key questions, analysis and insights from our global research team.

Sustainability and Climate Trends to Watch for 2024

Download the report →

Recent development:

•	What is the single biggest obstacle to increasing net-zero investments? MSCI CEO Henry Fernandez shared his views in Fortune.
•	MSCI is supporting the creation of a groundbreaking Net-Zero Data Public Utility, announced at COP28.

Resource for asset owners

Asset owners prepare for disruption

From macroeconomic uncertainty to technological disruption, asset owners are seizing opportunities as risks evolve in a volatile landscape. Read highlights from the MSCI Institutional Investor Forum co-hosted with CalPERS and CalSTRS.

Based on data for the Global Industry Classification Standard (GICS®) sectors from Nov. 30, 2015, to March 31, 2023. Analysis included constituents of the MSCI ACWI Investable Market Index (IMI) as of April 13, 2023. GICS is the global industry classification standard jointly developed by MSCI and S&P Global Market Intelligence.

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