Decarbonisation in equity benchmarks: Not everywhere and not all at once

Investors commonly track portfolio emissions using absolute and intensity-based metrics. Covering operational (Scope 1 and 2) and, increasingly, value chain (Scope 3) emissions of portfolio companies, these metrics underpin decarbonisation targets and progress reporting. But the key question is delivery: are listed companies actually cutting emissions? And if so, in which markets is that progress happening? Our analysis below draws on LSEG’s Climate MAP dataset (Management, Ambition and Performance), combining company emissions with transition disclosures on governance, targets and delivery.

From 2016 to 2023, aggregate absolute operational emissions from listed companies have continued to rise, as reductions in developed markets are outweighed by increases elsewhere. Across the FTSE All-World Index (covering 4,000 large- and mid-cap companies and representing about 90% of global equity market capitalisation), median Scope 1 and 2 emissions of developed market firms have fallen by ~1 to 6% per year since 2016 (Figure 1). While emissions are declining in developed markets – driven by Scope 1 and 2 cuts among large-cap companies – emerging markets are still moving in the opposite direction.

Emerging markets are driving the increase in global equity emissions in two ways. First, emissions in emerging markets are still rising, largely due to sector composition. Many firms remain concentrated in energy and resource-intensive industries, reflecting earlier stages of economic development and the industrial structure in these regions. Second, index coverage is expanding. More emerging market companies are now eligible for inclusion in global benchmark indices, as coverage expands and market depth increases. These new constituents, particularly from parts of Asia, typically have higher operational emissions and are earlier in their transition journeys.

As a result, emerging market firms are not only emitting more, but they are also adding more emissions into the investable universe, even as developed market incumbents are reducing theirs. These dynamics reinforce that operational emissions alone do not tell the full story, as many value chain activities and Scope 3 emissions often sit outside the regions where companies are domiciled or listed. 

These dynamics are now flowing through to portfolio metrics (Figure 2). Weighted average carbon intensity (WACI), based on emissions normalised against revenues, is around 40% lower in developed markets than it was in 2016, consistent with operational emissions falling by roughly 20% while revenues have grown by around 5% over the same period – an early sign of decoupling (Figure 3).

In contrast, emerging markets portfolios have moved in the opposite direction. Their WACI has risen as emissions doubled, and revenues increased by around 71% over the same period, signalling that revenues and emissions remain tightly linked (for a detailed attribution analysis on other factors contributing to WACI trends, see LSEG Decarbonisation in Portfolio Benchmarks Report (2025). Against this backdrop of uneven progress, more companies are setting emissions reduction targets.

More listed companies now have emissions reduction targets and are disclosing them. This is particularly true in developed markets where roughly eight out of ten constituents now have formal emissions reduction targets, while adoption in emerging markets has also grown quickly, albeit from a much lower base (Figure 4).

Targets do matter. Firms with climate targets typically deliver more consistent reductions in their operational emissions than those without targets. But the pace of reduction remains modest, and most progress to date has been concentrated in Scope 1 and 2 emissions. Without clearer strategies for reducing value chain emissions, reductions in one region risk being offset elsewhere. 

These trends are evolving against a changing policy backdrop. Climate regulations and disclosure requirements are strengthening in some markets and progressing more slowly in others. At the same time, parts of Asia, notably China, is expanding low-carbon investment at pace. These differences will influence the outlook of the markets where emission reductions materialise and how quickly targets translate into delivery across listed portfolios.