Are big companies doing enough to meet climate goals?
Voluntary and regulatory frameworks around the world compel companies to publicly disclose information about their carbon emissions and climate targets. But too often, these disclosures are released without enough context. What do they really tell us? Are companies’ targets ambitious enough to align with the Paris Agreement’s goal of limiting global temperature rise to well below 2°C? And, critically, are companies actually on track to deliver them?
The annual State of the Corporate Transition report, produced by the TPI Global Climate Transition Centre (TPI Centre) at LSE and managed by Policy Fellow Ali Amin, cuts through the noise and translates complex corporate climate disclosures into insights for investors.
To do this, the TPI Centre use two core assessment tools: Management Quality (MQ) and Carbon Performance (CP). MQ evaluates and scores the governance, disclosures and climate practices companies have in place. CP assesses whether companies’ emissions-reduction targets are aligned with Paris Agreement pathways of 1.5°C or “below 2°C”.
In 2025, the report assessed 2,000 of the world’s most carbon-emitting public companies across 24 sectors. Importantly, the analysis is entirely based on publicly available information. Companies are selected by market capitalisation and cannot opt out.
Ali explains: “There are different regulatory landscapes around the world, which are increasingly making it mandatory for companies to disclose various levels of information and risks related to climate change. We essentially come in to give an objective view to investors of the key elements which are worth focusing on and how companies benchmark against the goals of the Paris Agreement.”
By providing comparisons at both global and sector levels, the report enables peer‑to‑peer analysis.
We are yet to see companies improve in a significant way to give investors' confidence that ... they will achieve their targets.
Management Quality – a “major implementation gap”
The 2025 report found that most companies sit at Level 3 (out of 5) for Management Quality. This means they recognise climate change as a serious issue, have a policy commitment to take action, set emissions‑reduction targets, and disclose their Scope 1 and 2 emissions, which cover direct emissions from their own operations and indirect emissions from purchased energy.
There are clear signs of progress. Management Quality scores continue to rise, with 172 companies moving up at least one level since 2024. Among companies assessed in both 2023 and 2024, improvements were seen across nearly all indicators. Disclosure of material Scope 3 emissions jumped from 36 per cent to 49 per cent, while climate scenario planning increased from 52 per cent to 64 per cent of companies.
But the picture changes when it comes to delivery. Despite widespread net zero pledges, very few companies can clearly demonstrate how they will actually meet their targets. Gaps remain in transition planning, implementation and real‑world action.
Ali describes this as a “major implementation gap”. He adds: “We are yet to see companies improve in a significant way to give investors confidence that not only are companies disclosing the right things, but there is also credibility that they will achieve their targets.”
This [really] is a collective effort ... If we miss annual carbon budgets at a global level, then the overall remaining budget becomes much stricter.
Carbon Performance – short-term action is lagging
On Carbon Performance, which tests whether company targets align with the Paris Agreement, the 2025 report recorded a notable improvement in long-term alignment.
The report covered more than 550 companies in 12 sectors for CP. Promisingly, the authors found the share of companies aligned with the 1.5°C benchmark by 2050 has more than tripled since 2020, from 9 per cent to 30 per cent, while the proportion of those not aligned with 1.5°C or ‘‘below 2°C’’ benchmarks has fallen 26 percentage points, or fallen from 82 per cent to 56 per cent.
However, most companies are still off track. In the long term (by 2050), 56 per cent of companies fail to align with Paris goals. That figure jumps to around three‑quarters when assessed over the short (2027-28) and medium term (2035).
Although long‑term net zero targets are now commonplace, near‑term action is lagging. The report finds too many companies are pushing meaningful emissions cuts into the future, with few setting the ambitious interim targets needed to back up their long‑term goals.
Even the best performing sectors aren’t there yet. Industries such as the auto sector and electricity have made notable progress but still fall short of the 1.5°C pathway, partly because global carbon budgets continue to tighten every year.
As Ali says: “There are sectors who are taking transition a lot more seriously and are able to create feasible pathways to reduce their intensity in a way which makes them aligned with the goals of the Paris Agreement.
‘‘However, despite the boom that we've seen in electricity with renewables and in the auto sector with electric vehicles, companies in these sectors still miss what is needed to be aligned with the 1.5°C goal. And that really goes to show that this is a collective effort. It's not just the fact that the auto and electricity sectors need to meet their goals. If we miss annual carbon budgets at a global level, then the overall remaining budget becomes much stricter.”
Economic, technological and political challenges to reducing emissions
When asked why some companies and sectors are lagging behind, Ali believes weak performance is currently down to gaps in disclosure and confidence.
“One reason why a company may not be comfortable setting capital expenditure behind its decarbonisation goals is because it's not confident. It doesn't have the signal from the market that if I was to go down this route, then my investment is safe, my business model is safe, and I will be competitive,” he muses.
Ali notes a clear sectoral mismatch. Some sectors score well on Management Quality, while others perform better on Carbon Performance. For example, oil and gas companies tend to score relatively highly on MQ due to regulatory scrutiny and detailed disclosures. However, this rarely translates into ambitious emissions‑reduction targets.
A key reason for this disconnect is that many oil and gas companies exclude Scope 3 emissions (emissions from the use of their products) from their targets. Including these would require major structural changes, such as large-scale investment in carbon capture or a shift towards renewable energy, which raises economic, technological and political challenges.
Ali stresses that solutions do exist. A few oil and gas companies have fully transitioned away from fossil fuels to become renewable energy producers. The problem is scale: these examples are still an exception and far from what’s needed to meet the Paris Agreement across entire sectors.
We've seen a lot of great work and momentum-building in the regulatory landscape for corporates.
Strong regulation and incentives for climate action
On what more can be done, Ali explains that while the TPI Centre doesn’t prescribe specific solutions, it does identify common factors shared by countries and companies that perform well on climate action.
A major factor is strong public policy. Companies that effectively reduce emissions tend to operate within regulatory environments that limit emissions‑intensive activities: for example, through carbon pricing, framework climate laws and targets for grid decarbonisation.
Alongside regulation, governments that enable the uptake of green technologies through supportive incentives see better outcomes. Ali highlights the UK’s Contracts for Difference scheme as an example. By guaranteeing a stable price for renewable energy when it was still expensive, the policy created a viable business case for renewables.
Moving towards a positive future
Looking ahead, Ali feels fairly confident. “We've seen a lot of great work and momentum-building in the regulatory landscape for corporates. For example, the International Sustainability Standards Board (ISSB) regulatory disclosure frameworks are being mandated and adopted across the globe in different forms.”
Under these new frameworks, Ali is expecting to see an improvement in Carbon Performance and more companies being comfortable with setting emissions-reduction targets.
The scope of research is also expanding for the TPI Centre. The Centre will soon assess 10,000 companies for Management Quality – a massive leap from the 2,000 assessed in 2025. The team are also working on a Net Zero Strategies Project, giving a very sector-specific lens to their research, and on a regional programme to connect the dots between the climate performance of countries and companies.
Ali Amin was speaking to Charlotte Kelloway, Media Relations Manager at LSE.
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