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In the pursuit of a greener future, high-emission companies can transition to more climate-friendly operations and achieve their decarbonization goals. This transformation requires comprehensive strategies that cover the entire value chain, encompassing decarbonization of operations, products, and the lifecycle of those products.
Key measures include prioritizing renewable energy use in facilities, phasing out high-emission substances such as refrigerants, enhancing energy efficiency through advanced analytics and electrification of fleets, and transitioning product offerings towards high-efficiency and low global warming potential options. For instance, companies can significantly reduce energy consumption by adopting high-efficiency equipment and cutting refrigerant emissions by up to 78% through research-driven innovation.
In industry-specific contexts like oil and gas, additional decarbonization levers such as carbon capture, utilization, and storage (CCUS), electrification, low-carbon hydrogen, and methane emission reductions are critical. Credible strategies often involve transparent emission disclosures, measurable methane abatement targets, and robust governance structures to ensure real, verifiable emission reductions.
For their decarbonization plans to be credible and attractive to environmentally conscious investors, companies need to ensure transparency, establish clear and science-aligned baselines and targets, and maintain rigorous independent verification and assurance mechanisms. Investors favour companies with detailed transition plans that incorporate data-driven roadmaps, strong governance frameworks, and evidence of measurable emission reductions.
In the global stock market, the MSCI All Country World Index does not provide specific details about which companies are included. However, investors can significantly reduce their portfolio emissions by avoiding a few companies within this index. Instead, forward-thinking investors should focus on companies pursuing ambitious decarbonization goals.
One such company is LafargeHolcim, a global building materials giant, which emitted over 148 million tons of CO2 in 2019 but has one of the most aggressive decarbonization plans in the cement industry. LafargeHolcim aims to reduce Scope 1 emissions per ton of cement by 17.5% and Scope 2 emissions by 65% by 2030 compared to 2018. The company's first net-zero production plant is about to open, and more than half of its research and development spending is on greener alternatives.
However, sectors like Energy, Materials, Automobiles, Utilities, and Industrials, which account for over three-quarters of emissions but only one-fifth of market capitalization in the MSCI All Country World Index, face challenges in transitioning from fossil fuels to renewable energy and from internal combustion engines to electric vehicles. The approach of retreating from emissions-intensive sectors and companies may cut off sectors with high investment needs from capital.
In conclusion, successful transition involves a mix of technical operational changes, product innovation, transparent and measurable emissions management, and credible governance and reporting practices. This holistic approach is essential to deliver both environmental impact and investor confidence.
- Environmental science plays a crucial role in guiding high-emission companies towards more climate-friendly operations, as they pursue their decarbonization goals.
- To attract environmentally conscious investors, businesses must ensure transparency, establish science-aligned baselines and targets, and maintain independent verification and assurance mechanisms in their decarbonization plans.
- The transition from fossil fuels to renewable energy and from internal combustion engines to electric vehicles is challenging for sectors like Energy, Materials, Automobiles, Utilities, and Industrials, which presents a significant opportunity for financing in environmental science and technologies.
