Portfolio carbon metrics are now central to investment decisions, climate risk management and regulatory reporting. However, new research from LSEG Data & Analytics suggests that many headline reductions in portfolio emissions have little to do with companies actually cutting carbon.
Asset owners and managers increasingly depend on these metrics to track progress against net zero commitments, shape portfolio construction and show accountability to stakeholders. According to LSEG Data & Analytics, measuring decarbonisation remains complex. Financed emissions and carbon intensity measures are widely used, but methodologies differ across the industry and no single metric tells the full story. Variations in Scope 3 coverage, portfolio composition, market valuations and wider macroeconomic conditions add further complications.
Now in its fifth annual edition, LSEG Data & Analytics’ Decarbonising portfolios report, produced with the UN-convened Net-Zero Asset Owner Alliance (NZAOA), analyses emissions trends across major equity and fixed income benchmarks. It draws on LSEG investment benchmarks alongside climate data covering around 60,000 issuers worldwide. This year’s edition also examines emerging priorities for institutional investors, including the emissions impact of AI-driven electricity demand, corporate climate commitments and the link between transition management and realised decarbonisation.
The findings suggest global equity emissions may be nearing a turning point. Absolute Scope 1 and 2 emissions for the FTSE All-World index were roughly 12.5 GtCO₂e in 2024, largely flat against 2019, even as the benchmark’s Weighted Average Carbon Intensity (WACI) dropped 34% between 2016 and 2024.
Sector trends reveal a sharp divergence. Telecoms and Energy posted the largest emissions falls, though LSEG Data & Analytics attributes these mainly to index turnover rather than operational cuts. Technology went the other way, with sector emissions climbing 28% between 2019 and 2024, the steepest rise of any sector, as data centres and AI computing drove up electricity use. For Technology firms reporting both measures, location-based emissions rose 60% between 2020 and 2024, compared with 20% on a market-based basis.
Climate targets are now commonplace, making credible delivery the real differentiator. By 2024, 81% of FTSE All-World companies reported Scope 1 and 2 emissions and 70% had a climate target. Taken at face value, these imply aggregate cuts of about 25% by 2030 and 50% by 2050. Yet emissions are still rising at half of benchmark constituents.
Of the 12.5Gt total, 9.5Gt falls under a disclosed target, 7Gt under a quantifiable absolute target and just 5Gt under targets covering full scope.
Scope 3 remains a significant blind spot. While 61% of FTSE All-World companies disclose at least one Scope 3 category, only 40% report those deemed material for their sector.
Composition effects also shape bond benchmarks. High-yield WACI fell 8% a year versus 2% for investment grade. Aggregate high-yield emissions dropped 9% annually, but among issuers remaining in the benchmark the decline was only 2%, reflecting defaults, rating changes, index exits and revenue growth.
Green bonds continue to expand, rising from 0.6% to 5.8% of the FTSE WorldBIG Corporate Index between 2016 and 2024, and from 0.05% to 1.06% of the FTSE World Government Bond Index.
For deeper insights, read the full report here.
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