Introduction

Climate-branded equity indices and funds often focus on decarbonization as a means of managing climate-related risks or delivering on portfolio emissions objectives. However, investors considering the relationship between their portfolios and the real economy may also wish to consider the extent to which these strategies are ‘aligned’ with Net Zero Emissions (NZE) pathways – even where that is not the explicit objective of the provider. When we do look at well-established climate-branded equity indices through an alignment lens, a more complex and challenging picture emerges.

Key takeaways

• Climate-labelled indices often have a higher ‘overshoot’ in projected absolute emissions than comparable market cap-weighted benchmarks relative to NZE reference scenarios, according to a new examination of eighteen products from major providers. Investors should avoid the leap-of-faith assumption that climate investment should inherently improve alignment.
• Climate-labelled indices are no more likely than cap-weighted indices to invest in companies that have committed to emissions reduction targets. In addition, only 6.4% of financed emissions for the entire MSCI World Climate Paris Aligned index come from so-called ‘key sectors’ (those with high climate relevance), versus 65.3% of financed emissions of the MSCI World index.
• Moreover, companies in climate-sensitive sectors do not appear to be on track to meet their own current decarbonization targets for either absolute emissions or carbon intensity, according to new research[1]. As such, the overshoots noted in this analysis may even understate the true gap.
  
  
  [1] Evaluating the Consistency of Companies Decarbonisation Targets in Critical Sectors (Bouchet, V., Clark, A., December 2025), available in Scientific Portfolio’s Knowledge Center

Author

Aurore Porteau de
La Morandière
ESG & Quant Researcher,
Scientific Climate Indices …………………………………………..

Shahyar Safaee
Deputy CEO and Business Development Director,
Scientific Climate Indices

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