Climate change is one of the most pressing issues of our time. On May 15, 2019, the carbon dioxide (CO2) level in the atmosphere was 415.70 parts per million (ppm), higher than it has ever been during human history. The annual increase in CO2 levels is increasing about 100 times faster than recorded during natural increases in Earth’s history. At the current rate of emissions, the planet is on track for 3-4 degree Celsius (5.4-7.2 degrees Fahrenheit) global temperature increase by the end of this century.
As investors who are concerned with climate change, we can take two actions – proactively investing in corporations which are climate leaders and divesting from corporations which are climate laggards.
While there is undeniably a climate crisis, there is a huge window of opportunity for climate leaders to emerge. There are publicly traded corporations that recognize that taking climate action is good for the world and good for their bottom line.
Microsoft, through a holistic climate strategy which includes an internal price on carbon, has had carbon neutral operations since 2013 and boldly announced in early 2020 that they would: be carbon negative by 2030, remove historical emissions by 2050, and launch a new $1 billion climate innovation fund. Elon Musk saw the opportunity to bring electric vehicles to the market and Tesla, in Q4 2019, beat market expectations. Ikea has worked to efficiently transport products, reducing emissions and the cost of transport.
There exist other corporations which have failed to recognize climate opportunity and continue to put both the world and their performance at risk by being climate laggards.
In terms of the greatest emitters of cumulative greenhouse gas emissions in the world, Chevron and Exxon Mobil rank Number 1 and 2, respectively, for investor and state-owned entities. Exxon Mobil, the US’s largest oil and gas company, has also played a particularly large role in influencing public perception about climate change, asserting that there is doubt about the impacts of human-induced climate change.
For the fossil fuel industry to continue to thrive, financiers must fund the projects. JPMorgan Chase is the world’s number 1 financer to the fossil fuel industry, by a wide margin. JPMorgan Chase provided $196 billion for fossil fuel activities between 2016 and 2018, nearly a third higher than the second-worst bank, Wells Fargo.
Chevron, Exxon Mobil, and JPMorgan Chase are included in the three most followed indices in the US stock market – the S&P 500, Dow Jones Industrial Average, and Nasdaq Composite. Many funds which are deemed “sustainable” or “ESG” include all 3 of these corporations.
Climate Focused Investing Resources
Investors can take climate action by adding climate leaders to their portfolios and removing climate laggard from their portfolios.
The Clean 200 provides a list of the 200 publicly traded corporations that are leading the way with solutions for the transition to a clean energy future. The Carbon Majors lists the top 20 fossil fuel producers, seen in the below table, which together contributed to 35% of all energy-related carbon dioxide and methane worldwide since 1965.
Fossil Free Funds provides a Fossil Fuel Grade for mutual funds and exchange traded funds (ETFs). The grade is determined based on the funds’ investments in coal, oil, natural gas, and in fossil-fired utilities.
Sustainable Development Goals
The 17 UN Sustainable Development Goals (SDGs) provide an internationally recognized framework for sustainability. Climate action will directly contribute to SDG 13: Climate Action. Climate action may also contribute to:
- SDG 7: Affordable and Clean Energy
- SDG 10: Reduced inequalities
- SDG 11: Sustainable Cities and Communities
- SDG 12: Responsible Consumption and Production
Photo by Chelsea Deeyo