Companies across the globe are working to reduce their carbon emissions, and many are doing so by net-zero carbon emissions commitments. What does this mean? Many companies are shifting away from coal-powered power plants toward renewable energy, which has less environmental impact than coal plants. While you might not realize it, even if you don’t work at one of these companies, your life relies on the success of net-zero carbon emissions initiatives through your electricity use alone. That’s why it’s so important to spread awareness about these efforts and how they can benefit everyone in the long run.
What are Net Zero carbon emissions?
Net-zero means cutting your greenhouse gas (GHG) emissions to zero—not offsetting them. The term carbon neutral often has a similar meaning, but that can mean different things to different people. For some, it simply means getting all their energy from renewable sources—and even then, not everyone considers it truly net-zero because you may have needed to burn fuel somewhere else for transportation or other reasons. Others consider carbon neutral only when you’ve taken specific actions like planting trees to compensate for your fossil fuel use—which isn’t true net-zero. Bottom line: If you aren’t reducing and eliminating your emissions, then you aren’t net-zero. There are many great tools and resources available for calculating and offsetting your net-zero goals. But first, start by cutting down on those carbon emissions!
How does it relate to SRI/ESG investing?
CDP first launched the Net-Zero Carbon Emissions (NZE) global commitment to We Mean Business Coalition (WMC), which brings together members of the business, investors, and cities to accelerate corporate action on climate change. The NZE commitment requires companies to reduce their net greenhouse gas emissions to zero, draw down their net emissions to near zero, or offset any remaining emissions through forest restoration, tree planting, or other carbon reduction projects. Additionally, businesses are asked to make public commitments to doing so by signing onto one of three different types of Net-Zero Commitments (ZC): 1) ZC1—Buildings; 2) ZC2—Scope 1 + Scope 2; 3) ZC3—Scope 1 + Scope 2 + Scope 3. Once these commitments are made, signatories report their progress annually through CDP’s Climate Action Registry. Companies must immediately make changes towards setting Net-Zero targets because climate change will reach catastrophic levels without immediate action. To date, 100% of MSCI ESG Index constituents have signed on as Net-Zero emitters, increasing from around 15% just two years ago. However, further progress needs to be made if we genuinely want to address climate change.
What kind of investor would benefit from this type of investment product?
Investors who take a long-term perspective and have a keen interest in sustainable investing will benefit from these types of investments. Not only does it reduce investors’ exposure to climate risk, but it also allows them to support companies with policies related to sustainability. In addition, investors can see returns from these types of investments in traditional ways, such as stock price appreciation and dividends. That way, if an investor changes their mind about net-zero carbon emissions investment products, they do not necessarily need to liquidate their entire portfolio. Instead, they can liquidate part of their portfolio while keeping other parts invested because there are still positive aspects of maintaining investment in these types of companies.
Because there is little difference between net-zero carbon emission strategies and traditional strategies when creating portfolios, any individual who may want to invest in one should ask themselves how much they care about sustainability. If they care very much, it will make sense to create or maintain some portfolio of at least partially net-zero carbon emission investment products. Furthermore, investors can participate in environmental and social impacts by choosing companies that align with their values (although many argue that doing so may provide more benefits than financial returns).
7 companies who have made net-zero carbon emissions commitments
Apple, Johnson & Johnson, Kohl’s Department Stores, Nike, Procter & Gamble Co., Target Corp., and Wal-Mart. These companies have all taken a step in a positive direction by making commitments to reduce their environmental impact by reducing their energy use and greenhouse gas emissions while still keeping up with business demands. These seven companies are just some of many more that have made net-zero carbon emissions commitments since California enacted its Global Warming Solutions Act in 2006. This act requires companies who do business in California to report how much they emit into Earth’s atmosphere on an annual basis… They must also set targets for how much they will reduce those numbers every year until 2050. And what about you—have you considered your company’s net-zero carbon emissions commitment? If so, you should know that it’s easier than it sounds – you can trust the findings ESG platform to help you embrace best practices in no time.
To learn more, visit our ESG resources page.