Australia has the "highest embedded carbon" of any group in the S&P Global 1200 index though improvements is being made, according to S&P Dow Jones Indices.

The Carbon Scorecard report, which assesses S&P Global 1200 companies on carbon footprint, fossil fuel reserve emissions, coal revenue exposure, energy transition and green-brown revenue strain - found the Australian index had the highest exposure to carbon.

"The S&P/ASX All Australian 50 had the highest level of embedded emissions in proven and probable fossil fuel reserves and the greatest percentage of revenues derived from coal-based activities," the report said. 

According to S&P Dow Jones Indices, Australia has almost 20,000 tonnes of emissions in owned reserves, which it said equates to roughly 40,000 barrels of fuel oil burned per US$1 million invested in the portfolio of the stocks tracking the S&P/ASX All Australian 50.

"This large investment in reserves might suggest that the Australian economy is tying itself to a fossil fuel future," the report said.

"However, it is important to note that this analysis is only looking at listed and not state-owned companies, so it does not present the full picture of the local economy.

"It is also necessary to consider forward-looking metrics such as capex and research and development in conjunction with carbon data, so as not to overlook companies that are starting to redirect capital toward alternative cleaner-fuel solutions."

The report also found that the S&P/ASX All Australian 50 also lags the rest of the S&P Global 1200 on energy generation mix, however there are signs that this is changing.

"The S&P/ASX All Australian 50 has the furthest to go to decarbonise its generation mix due to its current coal exposure, however we are seeing encouraging actions taken by local government to respond," the report said.

"The City of Melbourne, for example, has collaborated with others to source its energy from renewable sources, sending a signal to market participants to capitalise more renewable infrastructure in the area."