Decarbonising portfolios 2026: Tracking the transition across investment benchmarks 

Portfolio carbon metrics are becoming more central to investment decision-making, climate risk management and regulatory reporting. Asset owners and asset managers increasingly rely on these measures to track progress against net zero commitments, inform portfolio construction and demonstrate accountability to stakeholders.

Yet measuring portfolio decarbonisation is far from straightforward. While financed emissions and carbon intensity metrics are widely used, approaches vary considerably across the investment industry, and no single measure provides a complete picture. The challenge is further compounded by differences in Scope 3 coverage, portfolio composition, market valuations and broader macroeconomic factors.

Now in its fifth annual edition, LSEG’s Decarbonising portfolios report, produced in collaboration with the UN-convened Net-Zero Asset Owner Alliance (NZAOA), examines emissions trends across major equity and fixed income benchmarks. The research combines LSEG investment benchmarks with climate data and analytics covering around 60,000 issuers globally to help investors understand the factors driving portfolio emissions and decarbonisation outcomes.

Through detailed analysis, this year’s report updates and expands on previous editions, spotlighting emerging priorities for institutional investors, including the impact of AI-driven electricity demand on emissions, corporate climate commitments and the relationship between transition management and realised decarbonisation.

-        Global equity emissions may be reaching a turning point

Absolute Scope 1 and 2 emissions for the FTSE All-World index stood at around 12.5 GtCO₂e in 2024, broadly unchanged from 2019, while the benchmark’s Weighted Average Carbon Intensity (WACI) fell 34% between 2016 and 2024. 

-        Technology bucks the trend

Telecoms and Energy recorded the largest declines in benchmark emissions, but these were largely driven by index turnover rather than operational emissions cuts. Technology moved in the opposite direction: sector emissions rose 28% between 2019 and 2024, more than in any other sector, amid growing electricity demand linked to data centres and AI-related computing. 

-        With climate targets now widespread, credible delivery is becoming the differentiator

By 2024, 81% of FTSE All-World companies reported Scope 1 and 2 emissions and 70% disclosed a climate target. Taken at face value, those targets imply aggregate emissions cuts of approximately 25% by 2030 and 50% by 2050. Yet emissions are still rising at half of benchmark constituents, while many targets remain difficult to quantify and track. 

-        Scope 3 remains a major gap in portfolio emissions analysis 

61% of FTSE All-World companies disclose at least one Scope 3 category, but only 40% disclose the categories considered material for their sector. 

-        Bond benchmark decarbonisation is also shaped by composition

High-yield WACI fell 8% a year, compared with 2% a year for investment grade. Aggregate high-yield emissions fell 9% a year, but emissions among issuers remaining in the benchmark fell only 2% a year, showing how defaults, rating changes, index exits and revenue growth can drive the headline result. 

-        Green bond exposure continues to grow

Green bonds increased from 0.6% to 5.8% of the FTSE WorldBIG Corporate Index between 2016 and 2024. Their share of the FTSE World Government Bond Index rose from 0.05% to 1.06%, while the sovereign benchmark’s production emissions intensity fell 4% a year between 2018 and 2026.

-  Assess the strengths and limitations of commonly used portfolio carbon metrics

- Track long-term decarbonisation trends within a relatively stable reference global portfolio 

- Benchmark climate performance across multiple carbon metrics 

- Understand what is really driving portfolio decarbonisation trends  

- Discover how to better interpret climate disclosures, transition targets and portfolio alignment metrics 

-  Coverage across equity and fixed income benchmarks, including investment-grade, high-yield and sovereign bonds. Nine-year consistent series to 2016, now in its fifth edition  

- Dual Scope 2 reporting comparing location-based and market-based emissions at benchmark level. For Technology companies disclosing both, location-based emissions rose 60% between 2020 and 2024 against 20% market-based. 

- Attribution analysis that separates real emissions reductions from non-carbon factors, using a logarithmic ratio method developed by LSEG. Most reported declines in portfolio carbon intensities are due to non-carbon factors. 

- Target coverage cascade showing what climate targets cover. Of 12.5Gt CO2e in the FTSE All-World Scope 1 and 2 emissions, 9.5Gt sits under a disclosed target, 7 Gt under a quantifiable absolute target and 5GT under targets covering full scope. 

- Credibility-adjusted alignment scores weighting stated by TPI Management Quality, rather than taking targets at face value.  

We used various LSEG proprietary sustainable investment datasets in our analysis, including climate data, fixed-income data, TPI Management Quality data and FTSE Russell indices.

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