FTSE Russell Insights

Are corporates walking the walk on climate pledges?

Felix Fouret

SI Research Lead

How companies can build greater investor confidence by disclosing historical target data and publishing transition plans about their future climate-related commitments.

Corporate climate commitments used to be neatly tucked away in responsibility reports, but now companies boldly publicise their promises of ‘halving emissions by 2030’ and ‘achieving net zero by 2050’. Between the 2015 Paris COP and Glasgow COP in 2021, listed issuers setting carbon targets went from 900 to over 2000.[1] And while just 4% of FTSE 100 companies set net zero targets in 2018, over 85% did by the end of 2022.[2] Crucially, investors are also using corporate targets to test companies’ alignment with 1.5°C or 2°C pathways (e.g. through initiatives such as TPI and SBTi) and to assess the net zero alignment of their own portfolios – think financed emissions[3] or Implied Temperature Rise (ITR) metrics.[4]

But are companies actually delivering on these targets? Currently no systematic framework exists to assess companies’ progress towards these voluntary targets, and, because most companies have only set targets in the last few years, in many cases, it’s too soon to tell.

However, we do have some data to check whether companies have achieved their historical goals. We studied the FTSE Europe Developed Index as it has the highest rate of companies disclosing a carbon target for 2020 or prior.[5] We then focused on a subsample of the 130 companies that represent more than 99% of the index emissions[6] – over two-thirds of which had a set an emissions reductions target for 2020 or prior to that (compare this to the FTSE All World, which covers large and mid-cap companies globally in which only 15% of companies had set a 2020 or pre-2020 target).

Here’s what we found (see Figure 1):

  1. Bespoke target metrics and poor follow-on disclosures makes robust tracking often impossible. Almost a third of the companies set their targets using hard-to-compare, bespoke metrics (net emissions, production-based intensity metrics, decarbonisation index, against a projected BAU, etc). But worse, after setting the target, they often failed to report on these metrics in subsequent disclosures. After carefully reviewing our sample, we were only able to identify the level of emissions reductions achieved in the target year for less than half of these companies.
  2. Where we can track targets, almost half of companies did not hit them. Among the companies that had set a target for 2020 or earlier and reported on their target year emissions, only slightly more than half achieved at least one of their targets.

Figure 1: Only one in three companies hit their emissions reduction target for 2020 or prior

Figure 1 shows bespoke target metrics and poor follow-on disclosures which makes robust tracking often impossible. Where we can track targets, almost half of companies did not hit them.

Source: Data from 130 companies of FTSE Europe Developed Index that represent more than 99% of the index emissions. FTSE Russell, Dec 2022

Four key actions to enhance trust in corporate carbon commitments

A poor corporate track record in meeting emissions reductions targets presents an urgent challenge and undermines trust in corporate carbon commitments from investors and other stakeholders. Four key actions can help to improve the situation and should be central to investor engagement on climate:

  1. Emphasise the importance of setting clearer emissions reductions targets (we have written extensively about this here and here, including proposing a simple tabular disclosure template that has been featured as best practice example in the updated TCFD Guidance).
  2. There also needs to be a greater focus on short-term emissions reductions with a two to five year focus, as we need to be able to follow companies’ emissions pathways on a more immediate and regular basis. This chimes with the key findings of CA100+, which finds that only 7% of systematically important carbon emitters currently meet all criteria for short-term targets, a much lower share than for medium and long-term targets.[7]
  3. Push for better ongoing disclosures enable the consistent tracking of corporate emissions against reductions targets over time. This should also include historical datapoints, which currently are often difficult to interpret or missing entirely. New standards and regulations on climate disclosures by the SEC, the ISSB, EFRAG and others will help, but it will take time for these to take effect. he new V.2.0 CA100+ framework (which LSEG helped to develop) includes an indicator to track companies’ historical GHG emissions performances.[8]
  4. Last but not least, clearly laid out Transition Plans are critical to enhance the credibility of emissions reductions commitments(at LSEG we were proud to published our first one last year).[9] These plans are key for investors to understand if companies have set out coherent 2050 pathway or if their proposed emissions reductions are based on vague plans and unproven assumptions. Robust guidance for standardised transition plan disclosures – such as the ones we are helping to develop in the UK Governments’ Transition Plan Taskforce (TPT) and the Glasgow Financial Alliance for Net Zero (GFANZ) – are key to guide companies in providing meaningful transition plan disclosures.


[1] J. Kooroshy, F. Fouret, C. Dodsworth, and J. Simmons. Towards investor-oriented carbon targets data. FTSE Russell Index Insight, 2021.

[2] Article 3 in DP23/1, Financial Conduct Authority (FCA)

[3] The Global GHG Accounting and Reporting Standard for the Financial Industry (carbonaccountingfinancials.com)

[4] Measuring Portfolio Alignment.

[5] 52% of the index companies have published a target with a targeted year prior to 2020.

[6] Scope 1 & 2 total emissions of the index are the weighted average of the index constituents’ emissions.

[7] Climate Action 100+ Net Zero Company Benchmark shows an increase in company net zero commitments, but much more urgent action is needed to align with a 1.5°C future | Climate Action 100+

[8] Climate-Action-100-Net-Zero-Company-Benchmark-2.0-Consultation-Guide-1013.pdf (climateaction100.org)

[9] Since November 2021 and the emergence of this terminology, multiple organisations (GFANZ, CA100+, TPT, EFRAG) have already defined how companies should disclose information when talking about transition or net-zero.

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