Real progress towards decarbonisation remains uneven. To enable a solid and upward assessment of a company's transition towards the net-zero emissions target, Neuberger created the “Net-Zero Alignment Indicator” in 2023, designed to assess the degree of alignment of companies with the net-zero emissions target based on their ambitions and decarbonisation efforts. Developed in collaboration with clients who have decarbonisation targets, it incorporates specific sub-indicators based on the general expectations of the IIGCC's Net Zero Investment Framework. Since its creation, more than 2,000 companies from fixed income and equity portfolios have been analysed. Real progress towards decarbonisation, as revealed by the indicator, remains uneven.
Although the overall state of alignment remained relatively stable from year to year, the underlying momentum is fragile. A more detailed analysis of the indicator reveals a landscape where ambition and long-term targets are still relatively widespread, but short-term strategy and capital allocation often lag behind.
Last year's results were marked by macroeconomic and political dynamics, especially in the US. Political polarisation and uncertainty surrounding climate policies generated doubts among companies that rely on regulatory clarity to justify long-term capital commitments. This contributed to a slight setback in adoption, particularly of long-term targets and decarbonisation strategies. The setback was less pronounced in Europe and the Asia-Pacific region, where regulatory frameworks remain more consistent.
In 2025, a sustained divergence was also observed at the sector level, with the energy sector registering the largest downward trend. This is primarily due to large oil and gas companies, many of which continue to maintain their overall net-zero emissions targets but have reduced the pace and scope of their decarbonisation plans. The financial sector experienced another year of decline in its alignment levels, as occurred in 2024. Some banking institutions maintain their public commitments to the net-zero emissions target, while others have scaled back their transition plans and some have completely abandoned their targets. These changes, along with the recent announcement by the Net-Zero Banking Alliance that it will immediately cease operations and become a framework initiative, highlight the regression in alignment. In contrast, the industrial, materials, and utilities sectors are among the main contributors to the improvement in alignment, reflecting progress in sector-specific decarbonisation strategies and capital deployment. Competitive renewable energy in cost terms, along with innovation in energy efficiency, has allowed these sectors to advance more than others.
The divergence is equally evident among technology companies. It is increasingly relevant for investors who value actual decarbonisation outcomes to note the growing disparity in how hyperscalers manage energy sourcing. Although many hyperscalers maintain ambitious net-zero emissions commitments, the rising demand for data centres has complicated their fulfilment. The increase in absolute emissions, greater reliance on fossil fuel energy, and the growing capital allocation to energy infrastructure are testing the credibility and comparability of corporate climate strategies. Hyperscalers that proactively invest in grid solutions, long-term clean and firm energy, and system-wide decarbonisation facilitators are better positioned to reconcile growth with climate alignment. While Meta continues to carry out sustainability initiatives, these lag behind those of its competitors, especially when compared to those of Alphabet.
The way forward for companies in the MSCI World index
Data on projected scenarios highlights the magnitude of the challenge. Even starting from optimistic hypotheses, the MSCI World index does not reach the illustrative target of 90% of issuers being “compliant”, “aligned”, or “in the process of aligning” with net-zero emissions trajectories by 2030. In the “Acceleration” and “Base” scenarios, the improvement is almost entirely due to companies strengthening their decarbonisation strategies and increasing capital allocation. In the “Reversal” scenario, over 65% of companies lack a decarbonisation strategy or a specific capital allocation for decarbonisation efforts. Therefore, even in an “Acceleration” scenario, the index is likely to continue presenting a significant transition risk.
When analysing the overall landscape, the year 2026 began with a clear message: the transition towards decarbonisation is no longer defined by mere aspiration but by credibility. Companies and investors are likely to stop focusing solely on ambition to pay attention to how companies are aligning capital allocation and strategy with their objectives. Therefore, investors looking to manage these exposures will find it more convenient to adopt an active rather than a passive approach. Understanding and identifying which companies are ready to back their objectives with credible transition plans will be key to seizing transition opportunities while mitigating the risk of companies that fail to go beyond mere ambition.
The year 2025 highlights that the transition to a low-carbon economy is no longer a uniform path driven by policies, but an uneven investment landscape marked by execution risk, capital intensity, and increasing dispersion between sectors and regions. The central question of investment is increasingly about determining in which areas capital, policies, and technology are likely to align, and where structural constraints, funding gaps, or governance deficiencies may persist. As the transition progresses, investors who deliberately leverage these levers are better positioned to manage downside risk, seize selective upside opportunities, and adapt portfolios as transition pathways continue to diverge.