Tracking Carbon reduction progress
The last twelve or so months have seen a flurry of corporate commitments and a huge ramp-up in ambition to reduce carbon emissions. It has been estimated that almost one quarter of global CO2 emissions and more than half of global GDP were covered by Net Zero commitments by June 2020(1). However, the gap between ambition and reality can often be very significant, for example, due to a lack of standards(2).
Global warming and the role of GHG emissions is a well-established fact(3). In response, carbon reduction efforts in the private sector have been made for decades. Such carbon reductions were reported, for example, as part of energy efficiency programmes (4). The goalposts have shifted in recent years due to the urgency of the climate crisis. Global warming has gained worldwide attention not least due to the Paris Agreement in 2015. Countries are now strengthening their commitments through setting Net Zero targets. Six countries have enshrined Net Zero reduction in law, five countries and the EU have proposed legislation, fourteen countries have targets in policy documents, while many more are discussing Net Zero targets (5).
In the private sector, carbon reduction has since become a strategic objective for many businesses and has evolved well beyond the isolated environmental targets of the past. Today, carbon reduction is a priority for many companies and their stakeholders - including shareholders and creditors. Yet, the voluntary nature of most efforts means that targets can be set through arbitrary parameters. What is needed to solve the climate crisis are commitments to reduce GHG emissions that are aligned with scientific global warming scenarios. A study of companies with science-based targets shows that these companies reduce emissions at far greater rates relative to emissions trends in the wider global economy (6).
1 These estimates include targets set by cities, regions, universities, investors and companies under the ‘Race to Zero Campaign’. See UN Framework Convention on Climate Change (2020). click here
2 Financial Times (2020). The problem with zero carbon pledges.
3 William D. Nordhaus (1976). Economic Growth and Climate: The Carbon Dioxide Problem. Yale University.
4 See, for instance, Unilever’s ‘Environmental Performance 2000’ report which shows CO2 reductions from 1995 due to energy saving measures.
5 See Energy & Climate Intelligence Unit for a detailed breakdown of country Net Zero commitments: click here
6 See SBTi (2021). From Ambition to Impact: Science Based Targets Initiative Annual Progress Report 2020.
This commentary is intended for non-professional investors within the meaning of MiFID II. It is provided for informational and educational purposes only and is not intended to serve as a forecast, research product or investment advice and should not be construed as such. It may not constitute investment advice or an offer, invitation or recommendation to invest in particular investments or to adopt any investment strategy. Past performance is not indicative of future performance. The opinions expressed by La Française Group are based on current market conditions and are subject to change without notice. These opinions may differ from those of other investment professionals. Published by La Française AM Finance Services, head office located at 128 boulevard Raspail, 75006 Paris, France, a company regulated by the Autorité de Contrôle Prudentiel as an investment services provider, no. 18673 X, a subsidiary of La Française.
Download the quarterly report