MSCI Examines Corporate Response to US Withdrawal from Paris Accord

(3BL Media/Justmeans) – The central aim of the Paris climate agreement is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century below 2 degrees Celsius. The agreement also aims to boost the ability of countries to deal with the impacts of climate change.

However, the official pullout of the US from this historic accord has led to questions about the commitment of American companies to carbon reduction targets. Thirty leading American companies responded to the pullout by reaffirming their commitment to CO2 reduction goals. But these companies account for just six percent of carbon emissions produced by mid- and large-sized US firms.

Companies such as the utility, energy, materials and industrial companies account for more than 80 percent of American corporate CO2 emissions. The response of these companies to the US pullout will have a defining impact on the global emissions targets. MSCI has conducted research to examine the situation if these companies choose to roll back their commitments.

The research shows that reversal of short-term targets would have minimal impact on overall carbon reduction goals, but if long-term targets are curtailed, it could have a significant impact. The reason is that American companies with long-term targets account for more emissions than those with short-term goals.

In a scenario where short-term targets are revoked and long-term targets sustained, the aggregate global reduction in corporate emissions by 2030 would shrink to 16.4 percent, compared with 17 percent if none of the companies back out of their current commitments.

In another scenario, where the US companies abandon all of their emission reduction targets, the aggregate emissions reduction by 2030 would shrink to 12 percent from 17 percent. This could have a crippling effect on the overall climate mitigation efforts.

It is also important to note that a vast majority of energy sector companies continue to lack targets. This could be one reason that some of the large US energy companies, including Exxon Mobil and Occidental Petroleum, faced shareholder proposals in 2017 calling for disclosure and strategy related to climate change.