Speaker 1: Hi everyone. So net zero you've probably heard it in
Speaker 1: the news recently. It's when an entity balances out its
Speaker 1: greenhouse gas emissions with other activities that store, reduce, and
Speaker 1: or offset those emissions, so in the end, what you're
Speaker 1: putting up into the airs effectively well nothing. These entities
Speaker 1: can be countries. For example, last year, the UK put
Speaker 1: into law a net zero by twenty fifty target, and
Speaker 1: earlier this year, China made headlines when it announced the
Speaker 1: twenty sixty net zero target, followed soon thereafter by South
Speaker 1: Korea and Japan. But these aren't the only ones. A
Speaker 1: rapidly growing list of countries have announced plans for net zero,
Speaker 1: and you can find extensive coverage on this on countries
Speaker 1: ambitions throughout be net research. But these entities can also
Speaker 1: be companies. Google, Amazon, and Apple have all set ambitious
Speaker 1: net zero targets. Microsoft has gone even further with a
Speaker 1: carbon negative target. But it's not just tech. Groups of
Speaker 1: companies in what seems like every sector have made their
Speaker 1: climate ambition. Is known, but why now? Why are we
Speaker 1: seeing more and more companies make these commitments. This week
Speaker 1: on the show, We've got benf corporate sustainability analyst Kyle Harrison.
Speaker 1: He'll tell us about what's driving corporate net zero targets,
Speaker 1: the why now, what net zero actually means in practice,
Speaker 1: and the bumpy right ahead for those going down this road.
Speaker 1: Our discussion is based on report titled Corporate net Zero
Speaker 1: Targets Primer Jump on the bandwagon being if users can
Speaker 1: get this report on BNF dot com, the BENF mobile app,
Speaker 1: and the Bloomberg terminal as a reminder being to stop
Speaker 1: provide investment or strategy advice, and you can hear the
Speaker 1: full disclaimer at the end of the show. I'm Mark
Speaker 1: Taylor and you're listening to Switch on the BNF podcast.
Speaker 1: Hey Kyle, thank you for coming on the show today. Yeah,
Speaker 1: thanks for having me. You know, it seems like every
Speaker 1: time I look at the news, I see a new
Speaker 1: net zero announcement, whether it be a country or a company.
Speaker 1: We're here today to talk about net zero, So Kyle,
Speaker 1: can you just start us off? What is net zero?
Speaker 1: Net zero is is a company taking all of its
Speaker 1: greenhouse gas emissions across its entire value chain down to zero,
Speaker 1: effectively in a lot of ways, balancing out its emissions
Speaker 1: with some type of activity that reduces or stores those emissions.
Speaker 1: Is that the same as when I hear a country
Speaker 1: say net zero as well? On paper? Um, it should
Speaker 1: be the same things. So you know, there's there's a
Speaker 1: bunch of different terminology that companies are using now when
Speaker 1: they set a net zero target or equivalent. Right. So, um,
Speaker 1: you hear companies say things like carbon neutral or climate
Speaker 1: positive or carbon negative, and a lot of those things
Speaker 1: are used interchangeably, those phrases, but by definition they actually
Speaker 1: all mean different things. So when a company sets a
Speaker 1: net zero target, it should really again apply to their
Speaker 1: entire value chain for all greenhouse gas emissions. But if
Speaker 1: you think about something like carbon neutral, that's only carbon dioxide, right,
Speaker 1: it doesn't include other greenhouse gases like nitrous oxide and methane.
Speaker 1: And then something like carbon negative actually involves taking your
Speaker 1: emissions below zero. So beyond just your emissions netting out
Speaker 1: at zero, you're investing in additional technologies or purchasing carbon credits,
Speaker 1: um that are effectively netting those emissions out below zero.
Speaker 1: So with a lot of these definitions, some of them
Speaker 1: say carbon, some of them say emission. So that distinction
Speaker 1: was really great for you to just point out. It
Speaker 1: looks like a lot of them are measuring the absence
Speaker 1: of emissions or carbon. And there's one term that you
Speaker 1: pointed out in the research note that we're talking about
Speaker 1: today and its climate positive. What does climate positive mean?
Speaker 1: So the key point, the key thing to keep an
Speaker 1: eye out for when you look at the terminology is
Speaker 1: is really the use of carbon or climate. Right, So
Speaker 1: when you think about any target or any phrase that
Speaker 1: uses carbon, again, that just applies to carbon dioxide. When
Speaker 1: the company phrases their target as climate positive or climate negative,
Speaker 1: which is effectively the same thing that applies to all
Speaker 1: greenhouse gas emissions, or at least it should on paper, right.
Speaker 1: So climate positive is very similar to a carbon negative
Speaker 1: goal or a carbon positive target, but again it just
Speaker 1: extends to methane and things like nitrous oxide as well
Speaker 1: as carbon dioxide. So that's kind of the key differentiator.
Speaker 1: But if you think about this, I mean from an
Speaker 1: investor standpoint, it becomes really different coal to actually sift
Speaker 1: through all these targets and compare them apples to apples, right,
Speaker 1: investors actually need to go ahead and look at these
Speaker 1: companies sustainability reports and those announcements specifically to see what
Speaker 1: those targets entails. And that's definitely one of the things
Speaker 1: that is potentially holding this market back at the current time.
Speaker 1: Let's get into the standards and and certification in a second,
Speaker 1: but really, can we go back to why our companies
Speaker 1: doing this at all? Is it pr is it having
Speaker 1: an edge in their competitors, Is it the consumer value proposition,
Speaker 1: or does it make them more investable or a combination
Speaker 1: of the all of the above. It's a combination of
Speaker 1: all the above. I would say that the biggest driver
Speaker 1: is definitely that investor pressure, right, So increasingly investors want
Speaker 1: to put their money in companies that mitigate their susceptibility
Speaker 1: to what we call climate risk and transition risk. So
Speaker 1: climate risk is your exposure to these physical climate related
Speaker 1: events like forest fires and droughts and electricity grid blackouts.
Speaker 1: And then transition risk is as we pivot to a
Speaker 1: low carbon economy and you have more low carbon regulation,
Speaker 1: you have changing consumer preferences. Companies again become increasingly susceptible
Speaker 1: to these types of risks. So by setting a net
Speaker 1: zero goal or an emission reduction strategy more broadly, companies
Speaker 1: actually make themselves safer to invest in because they're mitigating
Speaker 1: their exposure to some of those risks. If I'm an
Speaker 1: oil and gas company and I start investing in clean
Speaker 1: power or electric vehicles, like some of these oil majors
Speaker 1: are already doing, those are businesses that we think are
Speaker 1: going to you know, make up a larger part of
Speaker 1: the low carbon economy moving forward, more so than you know,
Speaker 1: fossil fuels. So that's, you know, one great example of
Speaker 1: how companies can kind of pivot and be more attractive
Speaker 1: from an investment standpoint. So net zero targets are really
Speaker 1: kind of the cream of the crop or the gold
Speaker 1: standard when it comes to emission reductions goals. So if
Speaker 1: you want to make an investor happy, really the best
Speaker 1: way to do it is to set a net zero target.
Speaker 1: What I would say, though, and you mentioned this earl
Speaker 1: of mark, is there's definitely a degree of one upsmanship here.
Speaker 1: So via a large technology company or utility or an
Speaker 1: oil and gas company, one of your biggest competitors sets
Speaker 1: in net zero goal. Um, that's driven a lot of
Speaker 1: other companies to set targets of their own to kind
Speaker 1: of keep pace with their competitors. So really it is
Speaker 1: a combination of many things. But I would say satiating
Speaker 1: investors and making investors happy is the biggest driver, followed
Speaker 1: by you know the fact that it's a great way
Speaker 1: to one up your peers and sustainability, so net zero
Speaker 1: peer pressure. So actually that leads me to another thought
Speaker 1: because if I'm looking at all of these kind of
Speaker 1: in theory and isolation, I'm watching the news cycle and
Speaker 1: I'm seeing different companies make net zero targets. Which industries
Speaker 1: are kind of leading in these target making endeavors. It's
Speaker 1: a bit cliche, but I would say that technology companies
Speaker 1: are definitely the leaders here. So they're not as emissions
Speaker 1: intensive as again companies in the oil and gas sector
Speaker 1: or utilities, but technology companies are setting to targets that
Speaker 1: need to be achieved much earlier than other sectors. So
Speaker 1: if you look at some of the leading tech companies
Speaker 1: that have set these goals like Google, Microsoft, Facebook, and Amazon,
Speaker 1: their targets are expected to be met in and that's
Speaker 1: ten years or twenty years earlier than the Paris Agreement.
Speaker 1: But it's also ten or twenty years earlier than most
Speaker 1: other net zero targets that are being set in other sectors.
Speaker 1: And why is this? They're just more ambitious, I would
Speaker 1: say part of it is the fact that they're they're
Speaker 1: just setting more ambitious goals. The other important thing to
Speaker 1: note is a huge portion of the carbon footprints for
Speaker 1: tech companies is what we would classify as scope too,
Speaker 1: and that means it's your indirect emissions that come from
Speaker 1: the electricity grid. So the most effective way to reduce
Speaker 1: your scope to emissions is to purchase clean energy. So
Speaker 1: that's kind of my long winded answer of saying they
Speaker 1: have a one size fits all solution to reduce a
Speaker 1: large portion of their carbon footprint. But the last thing
Speaker 1: I want to highlight that really makes the big tech
Speaker 1: companies stand out is there again setting net zero targets
Speaker 1: that also address their Scope three emissions, and those are
Speaker 1: your indirect emissions that come up and downstream along the
Speaker 1: value chain. So if you think of a company like Apple,
Speaker 1: that's from its product manufacturing upstream, so those large companies
Speaker 1: like Fox con and Taiwan Semiconductor, Whereas for an oil
Speaker 1: and gas company, their Scope three emissions largely come from
Speaker 1: the use of their products downstream, so think of things
Speaker 1: like burning road fuel and jet fuel. So a lot
Speaker 1: of tech companies are setting scope three targets as well.
Speaker 1: That actually ultimately end up at zero, and that's something
Speaker 1: that a lot of other sectors have not yet done.
Speaker 1: So they deserve high marks in that regard as well.
Speaker 1: I've been wondering why now. I still can't quite get it.
Speaker 1: Is it more pressure you feel like you hear these
Speaker 1: announcements all the time, as Dana said, right, is it
Speaker 1: more pressure from investors? Or is it the one upsmanship
Speaker 1: you know that's driving all these announcements now? Or did
Speaker 1: Paris and the I p c C in the one
Speaker 1: point five degree scenario have a huge impact? I mean,
Speaker 1: is this the resulting catalyst from that? So on the
Speaker 1: investor from you have massive asset managers and investors that
Speaker 1: are setting what we would call net zero finance dimissions.
Speaker 1: And I am aware that I'm throwing another term into
Speaker 1: the mix, heer, I apologize, But asset managers like black
Speaker 1: Rock and banks like Morgan Stanley are now making commitments
Speaker 1: where the emissions of their portfolios by will also be
Speaker 1: net zero um and again we call that net zero
Speaker 1: finance dimissions. Okay, So if you want to stay in
Speaker 1: you gotta you gotta perform exactly, And a lot of
Speaker 1: these companies are joining their specific initiatives for the investment
Speaker 1: community UM that that focus on these areas. So a
Speaker 1: great example is what we would call the Climate Action
Speaker 1: one hundred plus and that's a group of now over
Speaker 1: five hundred investors and asset managers that are pledging to
Speaker 1: get their portfolio companies to report better environmental, social and
Speaker 1: governance data but also to reduce their emissions. So again,
Speaker 1: you know, a lot of it is being catalyzed by
Speaker 1: that investor pressure. But the other exciting component to this is,
Speaker 1: and you know, Danny, you mentioned this in the beginning,
Speaker 1: you're starting to see a lot of countries now putting
Speaker 1: forward legislation for net zero um So, in the last
Speaker 1: month we've seen China, South Korea, and Japan all put
Speaker 1: forward legislation for a net zero target. And what that's
Speaker 1: really gonna do is it's going to kind of open
Speaker 1: the door and really trail blaze the way for the
Speaker 1: private sector within those countries to go ahead and set
Speaker 1: in net zero goes of their own. Because China is
Speaker 1: going to need to expedite it's retirement and fossil fuels,
Speaker 1: it's going to need to expedite it's clean energy, it's
Speaker 1: e V fleet rollouts, all those types of things are
Speaker 1: going to benefit private sector players. You know, that's further
Speaker 1: incentive for these companies to set targets of their own. Well, so, yeah,
Speaker 1: let's talk a little bit about accountability, because you referenced
Speaker 1: kind of two things just now, which is one the
Speaker 1: net zero targets that countries are making, which invariably does
Speaker 1: have to do with the companies that operate within it,
Speaker 1: and to financial community, which is demanding more information and
Speaker 1: presumably a lot of these companies to join and make
Speaker 1: commitments with third parties that are actually kind of at
Speaker 1: least systematizing this stuff or making it transparent in a
Speaker 1: way that they can use. So where do you think
Speaker 1: most of the pressure is and is going to come from?
Speaker 1: Will it be the finance community, will it be governments,
Speaker 1: or will it be something else? A lot of it
Speaker 1: will again come from from the finance community, but you
Speaker 1: do have a number of initiatives, many of which are
Speaker 1: competing with each other, that are now being rolled out
Speaker 1: to help standardize, you know, this net zero movement. So
Speaker 1: I guess we can kind of start from the broadest level.
Speaker 1: So the u N has convened what they call Race
Speaker 1: to net Zero. That's now a group of over eleven
Speaker 1: corporations that have set some form of a net zero
Speaker 1: target mark and Dan, I think you guys will will
Speaker 1: get this analogy. But you know when you're growing up
Speaker 1: and basically all the kids in in the United States,
Speaker 1: they go ahead and they play Little League baseball, right,
Speaker 1: and everyone is accepted into that Little League Baseball league.
Speaker 1: That's kind of the way that I would think of
Speaker 1: Race to Zero. It doesn't really have any stringent rules.
Speaker 1: Any company can join UM, and you have a lot
Speaker 1: of kind of mom and pop shops that are part
Speaker 1: of that UM. So that's kind of at the broadest level.
Speaker 1: And one of the things that Race to Zero wants
Speaker 1: to do is kind of help move the needle on policy.
Speaker 1: So if you can kind of show up to the
Speaker 1: negotiating table as a consortium of over a thousand companies UM,
Speaker 1: the hope there is that it can open the door
Speaker 1: for more access to clean energy buying and things like
Speaker 1: e V procurement. But then you also have a number
Speaker 1: of actually private set of lead initiatives. So two ones
Speaker 1: that I would highlight our Amazon's Climate Pledge UM and
Speaker 1: they even named their new arena in Seattle after this
Speaker 1: climate Pledge, So that's a group of companies that have
Speaker 1: planned or planned to go net zero. Then you also
Speaker 1: have transformed to net zero, which is rolled out by Microsoft.
Speaker 1: So these types of corporate lead initiatives are you know,
Speaker 1: partially driven by you know, a need for better PR.
Speaker 1: So as a company, I can align myself with a
Speaker 1: with a leader like Microsoft or Amazon, and that really
Speaker 1: does help from a PR standpoint. But what I would
Speaker 1: say that's really exciting about these these private sector lead
Speaker 1: initiatives is um they facilitate collaboration and that's one of
Speaker 1: the reasons they've been created. So for example, Amazon went
Speaker 1: ahead and purchased electric vehicles from Mercedes Benz, which is
Speaker 1: also part of the Climate Pledge, and they said that
Speaker 1: that transaction was actually facilitated by these two companies joining
Speaker 1: this initiative together. You know, they're planning for very similar
Speaker 1: collaboration to happen between the companies. So these private sector
Speaker 1: initiatives are are really exciting. But the one that I
Speaker 1: think any relevant stakeholder and investor, or a corporate sustainability practitioner,
Speaker 1: the one that everyone should be keeping an eye out on,
Speaker 1: is the net zero framework that's going to be rolled
Speaker 1: out by the Science Based Targets Initiative. So they're gonna
Speaker 1: be basically create a methodology in the next year or so. UM,
Speaker 1: that's gonna lay out a clear pathway for Again, what
Speaker 1: is net zero? So if you want to set a
Speaker 1: net zero target as part of the Science Based Targets initiative,
Speaker 1: it needs to meet certain criteria. But they're also laying
Speaker 1: out clear guidelines on how you actually achieve that goal.
Speaker 1: So what type of carbon credits you can use, what
Speaker 1: type of technologies you can use, how you have to
Speaker 1: reduce your gross emissions before you can use any of
Speaker 1: these technologies. All of that type of stuff is going
Speaker 1: to be made very clear, um and laid out within
Speaker 1: this Science Based Targets framework. UM. And I think you
Speaker 1: know to your point data about accountability. UM, that's going
Speaker 1: to go a long way and making sure that these
Speaker 1: companies are held accountable. Two questions, why are you confident
Speaker 1: in the Science Based Targets initiatives in particular? And can
Speaker 1: you give us a preview of what some of those
Speaker 1: things are carbon credits are or whatever they're called in
Speaker 1: there that a company can use to actually reach the target.
Speaker 1: So the reason I'm confident in the Science Based Targets
Speaker 1: Initiative is because you know, we have historical data. I mean,
Speaker 1: this is an initiative that has existed for for several
Speaker 1: years now, right, and at this point you have over
Speaker 1: a thousand companies that have pledged to set what we
Speaker 1: call a science based target, and that means that they
Speaker 1: will reduce their emissions in line with a well below
Speaker 1: two degree scenario, which is outlined in the Paris Agreement.
Speaker 1: So theoretically, on paper, the way the Science Based Targets
Speaker 1: Initiative works is if all the countries in the world
Speaker 1: they're not doing their part to get us well below
Speaker 1: two degrees, what if every single private sector player in
Speaker 1: the entire world went ahead and set a target of
Speaker 1: their own. That's the way that the Science Based Targets
Speaker 1: Initiative is expected to work. This campaign, this initiative has
Speaker 1: more momentum than any other sustainability commitment that currently exists
Speaker 1: out there. So this year you've had over four companies
Speaker 1: pledged to set one of these goals. For the net
Speaker 1: zero component of the Science Based Targets Initiative, it's basically
Speaker 1: going to be taking those goals that companies are setting
Speaker 1: in line with the Parish trajectory and basically taking it
Speaker 1: a step further. Um. So, Mark, you talked about kind
Speaker 1: of the ways in which the Science Based Targets Initiative
Speaker 1: outlines that you can hit your goal. First, inform a
Speaker 1: a company that would join this initiative, they need to
Speaker 1: go ahead and they need to reduce their gross emissions
Speaker 1: in line with that Powish trajectory. Um. And again that's
Speaker 1: something that any company with a science based target already
Speaker 1: has to do. And then only then once you've kind
Speaker 1: of reduced your gross emissions by you know, again pivoting
Speaker 1: your your business model away from emissions intensive practices or
Speaker 1: investing in low carbon technologies. Once you've done those types
Speaker 1: of things, you can go ahead and purchase carbon credits
Speaker 1: to kind of net out the remainder of your emissions
Speaker 1: and take them to zero. But the key differentiator that
Speaker 1: the Science Based Targets Initiative lays out is only carbon
Speaker 1: credits that actually remove carbon from the atmosphere or sequester
Speaker 1: or carbon can be used to achieve that target. So
Speaker 1: if you think about a company like Walmart that just
Speaker 1: made this announcement a couple of months ago that they're
Speaker 1: going to basically planned several million acres of forest UM
Speaker 1: and also restore I think a million square miles of ocean.
Speaker 1: That type of activity will go ahead and create carbon
Speaker 1: credits that again store sequester carbon. So those credits would
Speaker 1: be accepted under the science Based Targets initiative. But if
Speaker 1: I purchase a carbon credit that simply offsets my mission,
Speaker 1: say from a clean energy project or clean cookstone distribution,
Speaker 1: those would not be considered a viable means to achieve
Speaker 1: your science based target. So they're gonna set again a
Speaker 1: very stringent methodology for what is and what isn't accepted
Speaker 1: to achieve these goals UM. And again, I think that's
Speaker 1: going to turn this net zero landscape that we you know,
Speaker 1: talk about in our report and we define as the
Speaker 1: wild West of sustainability targets UM. It's going to take
Speaker 1: this from a wild West to kind of again a
Speaker 1: really standardized emission reductions movement. Are planting trees and doing
Speaker 1: those sorts of projects in addition to actually working on
Speaker 1: your businesses more direct emissions to what they do day today.
Speaker 1: Is that proving to be increasingly popular? It is if
Speaker 1: you look at the existing landscape of of carbon credits
Speaker 1: UM in the market. Forestry projects, which we broadly abbreviate
Speaker 1: as red plus because there's so many different kind of
Speaker 1: projects that fit into this category, including agriculture. Red plus
Speaker 1: projects make up about a quarter of the total carbon
Speaker 1: offset market today. That sector is growing faster than any
Speaker 1: other one. So energy generation projects, you know, from clean energy,
Speaker 1: those are the most common projects that exist, but a
Speaker 1: lot of those are legacy projects and they've existed for
Speaker 1: for you know, a decade now or more than a
Speaker 1: decade um, and they actually came from compliance carbon markets
Speaker 1: long ago, and some of those credits have been earmarked
Speaker 1: for corporations to use. So that's the biggest sector now.
Speaker 1: But if you look at what's growing the fastest, it's
Speaker 1: definitely forestry projects um. And you know, there's the opportunity
Speaker 1: to generate carbon credits from forestry projects all around the world.
Speaker 1: I mean, that's definitely one of the exciting um and
Speaker 1: one of the biggest drivers for for companies to look
Speaker 1: at this segment of the mark it. You mentioned ocean
Speaker 1: as well, So is that like areas where they're seaweed
Speaker 1: and seaweed is seen as a absorbing carbon or is
Speaker 1: there something else there? So I would say that anything
Speaker 1: related to ocean is kind of a niche part of
Speaker 1: the carbon markets now, you know. Again, I think Walmart's
Speaker 1: announcement was pretty groundbreaking. They want to be what they
Speaker 1: call a regenerative company moving forward. I don't think that
Speaker 1: ocean and water related carbon projects are going to be
Speaker 1: this this huge sector moving forward. I think again, there's
Speaker 1: gonna be a lot more focus on on four stream
Speaker 1: agriculture because there's a huge opportunity to sequester and store
Speaker 1: large amounts of carbon. But yeah, that's definitely you know,
Speaker 1: A way that companies can kind of again serve as
Speaker 1: a trailblazer in this area is is purchasing carbon credits
Speaker 1: from brand new projects that you know, other companies aren't
Speaker 1: already looking into. One of my favorite episodes we've done
Speaker 1: it was a few months ago with you and it
Speaker 1: was about carbon offsets and we talked about red plus
Speaker 1: in there, and we talked about the difficulty of certifying
Speaker 1: these projects. I imagine it's the same thing here, right,
Speaker 1: Who is going to be certifying these carbon credits that
Speaker 1: the company says they have or that an investor wants
Speaker 1: to see is proven. So in terms of carbon credits,
Speaker 1: all the certification will be carried out by the four
Speaker 1: major registries that kind of preside over the voluntary carbon market.
Speaker 1: So the Verified Carbon Standard is the largest. Then you
Speaker 1: have the Gold Standard, the Climate Action Reserve, and the
Speaker 1: American Carbon Registry. So those four markets will again really
Speaker 1: make sure that every carbon credit that is that is
Speaker 1: created comes from a verified, legitimate project. So companies will
Speaker 1: will continue to rely on those registries. But there's going
Speaker 1: to need to be a channel of communication opened between
Speaker 1: some of these net zero initiatives that I've talked about,
Speaker 1: like the Science Based Targets initiative and Transformed to net
Speaker 1: zero and some of these other corporate lead initiatives. There's
Speaker 1: going to need to be, you know, again an open
Speaker 1: channel of communication so that when a registry says that
Speaker 1: a carbon credit is permitted, that those net zero initiatives
Speaker 1: are made aware of that, and therefore they can go
Speaker 1: ahead and and basically put their seal of approval on
Speaker 1: a company achieving in net zero target um. So that's something,
Speaker 1: you know, a very important development that will need to
Speaker 1: see in the market moving forward. Have you seen startups
Speaker 1: pop up, you know to either subcontract to these net
Speaker 1: zero initiatives or are the initiatives, you know, doing this
Speaker 1: in house or how's that going to work? No startups
Speaker 1: that are focused specifically on net zero. If you again,
Speaker 1: if you want to go back to the carbon markets,
Speaker 1: there's a lot of really exciting things happening to further
Speaker 1: improve the measurability of carbon credits. So you know, if
Speaker 1: I plant that tree in that rainforest, actually you know,
Speaker 1: actively measuring how much carbon that tree is storing and
Speaker 1: also you know, making sure that that tree is still
Speaker 1: there ten years from now. UM. So you have really
Speaker 1: cool companies like Pachama UM that are looking at light
Speaker 1: R and SAT to like imagery and artificial intelligence and
Speaker 1: and all these emerging technologies two more actively measure carbon
Speaker 1: storage within the in the carbon markets. UM. And then
Speaker 1: you also have a company like Nori that's awful offering
Speaker 1: very similar technology for the agriculture sector. So again, if
Speaker 1: you think of something like regenerative agriculture being able to
Speaker 1: actively measure carbon sequestration from those processes, that's what these
Speaker 1: startups are focused on. And I think you know again
Speaker 1: they're those companies operate in the carbon markets. But the
Speaker 1: carbon markets are going to be so important for hitting
Speaker 1: a net zero goal that there's bound to be overlap, right.
Speaker 1: The other thing I would just highlight is there's gonna
Speaker 1: be a big reliance on on carbon capture technologies for
Speaker 1: companies to hit in net zero. So a great example
Speaker 1: is Occidental Petroleum, one of the big US oil majors.
Speaker 1: They set a really exciting and groundbreaking net zero target
Speaker 1: just last week. The reason it's groundbreaking is because it
Speaker 1: addresses their Scope one and Scope twomissions, which actually come
Speaker 1: from their direct operations, but then it also includes their
Speaker 1: Scope three emissions and taking those down to zero. And
Speaker 1: one of the interesting parts of Occidentals announcement is they're
Speaker 1: taking what they call a contrarian approach to hitting their
Speaker 1: net zero goal um. And that means they're actually they're
Speaker 1: not going to pivot away from fossil fuels at all. Um.
Speaker 1: They're gonna rely heavily on carbon capture and carbon removal
Speaker 1: technologies to hit that goal. Their their target ears is
Speaker 1: a ways away, right, it's not until so a lot
Speaker 1: can change between now and then. But I think a
Speaker 1: lot of companies are really, you know, putting a lot
Speaker 1: of money and betting a lot on carbon removal technologies
Speaker 1: like carbon capture utilization and storage coming within cost parity
Speaker 1: in the next couple of years. Are you saying that
Speaker 1: differs from other oil and gas companies in that the
Speaker 1: other companies are pivoting away from oil and gas as
Speaker 1: a course strategy. Exactly, and and just for some backgrounds,
Speaker 1: so European oil majors have really lead when it comes
Speaker 1: to setting net zero targets. And you know, again this
Speaker 1: is kind of where this terminology issue comes into play.
Speaker 1: In reality, most oil and gas companies are setting carbon
Speaker 1: neutral targets, so they're pledging to reduce their carbon emissions
Speaker 1: specifically from their own operations so their scope one in
Speaker 1: their scope to emissions. Again, you have leading European oil
Speaker 1: majors like Shell, Totel, VP any all these companies are
Speaker 1: are setting carbon carbon neutral targets for their scope one
Speaker 1: in scope to emissions. But you do have a handful
Speaker 1: of oil and gas companies that are also setting net
Speaker 1: zero targets that address their scope three emissions. Um So,
Speaker 1: Equinor and Repsol are the two leading again European oil
Speaker 1: majors that have done this, and now you have Occidental
Speaker 1: um in the US that have done the same thing.
Speaker 1: Um So these companies are really kind of paving the
Speaker 1: way moving forward. But if you look at you actually
Speaker 1: look at how some of these companies plan on on
Speaker 1: achieving these goals. Yeah, Mark, like you mentioned, it's going
Speaker 1: to be a pivot away from their traditional core business.
Speaker 1: So Shell, you know, has made you know, they've announced
Speaker 1: that they aim to be the world's largest power company
Speaker 1: in the next couple of years. And they've invested heavily
Speaker 1: in clean energy and electric vehicles and distributed energy UM
Speaker 1: and a bunch of other exciting areas. You know, bp
Speaker 1: UM has has said that they're going to be moving
Speaker 1: away from oil entirely. And then you have a company
Speaker 1: like Total that two months ago they signed the largest
Speaker 1: corporate power purchase agreement, so they signed they signed an
Speaker 1: agreement to purchase three giga watts of solar power in
Speaker 1: Spain to offset their scope to emissions. UM in Total
Speaker 1: has a much broader renewable energy goal where they want
Speaker 1: to be a huge renewable energy developer as well, so
Speaker 1: they want to sell power to utilities. So again, these
Speaker 1: companies are are really making holistic changes in the way
Speaker 1: they conduct business. I think that you know, the oil
Speaker 1: and gas sectors is going to be impacted in this
Speaker 1: way more than any other sector. Really, when I'm thinking
Speaker 1: about the net zero targets in the benieth that are announcing.
Speaker 1: You know, you previously mentioned about Amazon, and this has
Speaker 1: been a pretty big year for Amazon. COVID has meant
Speaker 1: a lot more packages being delivered. And meanwhile, um, I
Speaker 1: think I did see that announcement just last week regarding
Speaker 1: some of their recent initiatives in the carbon space. So
Speaker 1: is that initiative something that's happening, you know, at a
Speaker 1: very senior level that you know, Jeff Bezos ultimately is
Speaker 1: handling very closely, or is it something that's kind of
Speaker 1: deeper within the rest of the business is being given
Speaker 1: to the individual business units to handle. I think this
Speaker 1: is a thematic kind of internal area that we've that
Speaker 1: we've seen within corporations, and you know, it applies to Amazon,
Speaker 1: but it also applies to those oil and gas companies
Speaker 1: that we were just talking about. Um. So just for
Speaker 1: some context, when the company sets a clean energy goal
Speaker 1: or a broader emission reductions target, you know, you need
Speaker 1: input from all different you know, various internal departments to
Speaker 1: achieve that goal, right, So you need to get your
Speaker 1: accounting department on board. You need data from your facilities team,
Speaker 1: you need your PR team on board. But kind of
Speaker 1: the central team that is carrying out the sustainability strategy
Speaker 1: is your sustainability department, right um, and they're working with
Speaker 1: all these other departments in some way, shape or form.
Speaker 1: The key difference between a net zero target and these
Speaker 1: targets that I was just discussing is to your point
Speaker 1: in that you need executive leadership to carry out these
Speaker 1: types of goals. So again, for a company that is
Speaker 1: heading is working on hitting in net zero target, that
Speaker 1: means that they're going to make need to make holistic
Speaker 1: changes in the way that they do business. So for
Speaker 1: the oil and gas sector, that means moving away from
Speaker 1: fossil fuels potentially. For utilities, that means moving into renewables.
Speaker 1: For tech that means offering more software and other products
Speaker 1: to help their customers decarbonize. And all these types of
Speaker 1: huge changes that you know filter all the way down
Speaker 1: even to R and D and product those really can't
Speaker 1: be carried out unless you have executive level level leadership
Speaker 1: on board. Amazon is a great example of that. So
Speaker 1: they've developed this Climate Pledge initiative, but they also now
Speaker 1: have this Climate Pledge fund. Right, it's this two billion
Speaker 1: dollar fund where they're going to invest directly in startups
Speaker 1: and other exciting technologies that are going to help companies
Speaker 1: achieve net zero and Jeff Bezos is intimately involved in
Speaker 1: that entire process. He just announced the first round last week,
Speaker 1: right exactly exactly, So having that executive level buying is
Speaker 1: really important. And we actually we looked at this in
Speaker 1: our report. But I mentioned the Climate Action one hundred
Speaker 1: plus before, and that's investors that are pressuring their portfolio
Speaker 1: companies to decarbonize. And I realized this is a bit confusing,
Speaker 1: but within the Climate Action one hundred plus, the portfolio
Speaker 1: companies that are facing the most heat to decarbonize are
Speaker 1: these one hundred and sixty one companies that have been
Speaker 1: deemed as Focus companies, and they're considered to be the
Speaker 1: heaviest emitting companies in the world, So they're the ones
Speaker 1: that are facing the heat from investors the most. And
Speaker 1: a lot of these companies have set in net zero targets.
Speaker 1: I mean if you kind of look company by company
Speaker 1: at those one hundred and sixty one Focus companies, over
Speaker 1: three quarters of those companies now have a board seat
Speaker 1: that is specifically focused around climate um So you now
Speaker 1: have board level representation that's thinking about planning and executing
Speaker 1: on a sustainability strategy. So I think that right there
Speaker 1: is a is a testament to how important that executive
Speaker 1: level leadership is with sustainability in general. But I would
Speaker 1: say for net zero, it's it's not a nice to have,
Speaker 1: it's it's a requirement. With all of these net zero
Speaker 1: targets being made at the company level, I want to
Speaker 1: know whether or not this is going to make a
Speaker 1: big difference or a small difference if these companies actually
Speaker 1: do end up getting to their net zero targets in
Speaker 1: the timelines that they outline. So if you look at
Speaker 1: the six leading European oil majors that have set a
Speaker 1: again a carbon neutral goal for their scope one in
Speaker 1: scope to emissions, so that's Shell, Totel, b Any, Repsol,
Speaker 1: and equinor for them to just reduce their Scope one
Speaker 1: and Scope two emissions, it would result in two hundred
Speaker 1: and sixty five million metric tons of c O two
Speaker 1: removed on an annual basis, and again very similar to
Speaker 1: to Spain's annual missions. If you broaden that out and
Speaker 1: you look at the scope three emissions of the oil
Speaker 1: and gas sector, You're looking at several orders of magnitude
Speaker 1: more decarbonization from those six companies alone. So the impact
Speaker 1: is is huge. And just to throw out one more
Speaker 1: number here, so I mentioned those one hundred and sixty
Speaker 1: one focused companies that are outlined in the Climate Action
Speaker 1: one hundred. So they actually they estimate that those companies,
Speaker 1: those one hundred and sixty one focused companies are responsible
Speaker 1: for eight of industrial missions in the world. So again,
Speaker 1: a huge amount of impact can be made by getting
Speaker 1: the private sector to set net zero targets. So like
Speaker 1: a lot of Spains, a lot of Spains, a lot
Speaker 1: of Spains, a lot of Frances I love, I love
Speaker 1: my country comparisons. There you go. I guess I have
Speaker 1: one more question is this was a primery, this report,
Speaker 1: So if you haven't looked at it yet, everybody, please
Speaker 1: go look at it. It's really fantastic. What are the
Speaker 1: next questions or next reports you want to do in
Speaker 1: this in this theme? So I think the thing that
Speaker 1: will continue to do, at at a minimum in the
Speaker 1: short term is as new companies set net zero targets, which,
Speaker 1: like Danta mentioned, is at this point basically a weekly occurrence.
Speaker 1: We want to continue to make those those company level comparisons. Again,
Speaker 1: for an investor, there's there's so much terminology, there's such
Speaker 1: little lack of regulation currently that it becomes very difficult
Speaker 1: for investors to compare these targets apples to apples. So
Speaker 1: I think, you know, one of the things that we
Speaker 1: want to continue to do is is look at these
Speaker 1: companies and see who's setting the most ambitious goal and
Speaker 1: and why is that the case. I would say that
Speaker 1: the next kind of big thing that we're waiting for
Speaker 1: is again that that frameworker that methodology to be laid
Speaker 1: out by the Science Based Targets Initiative, because that's going
Speaker 1: to really kind of push this into hyper drive. It's
Speaker 1: going to expedite a lot of companies to start making
Speaker 1: these goals and them again, it's gonna go along wayne
Speaker 1: kind of creating and standardizing targets. So those are kind
Speaker 1: of the main things. And then I would just highlight
Speaker 1: in the report, we look at the ways that leading
Speaker 1: tech companies, materials companies, utilities, and oil and gas companies
Speaker 1: can achieve their targets right, because it's it's different for
Speaker 1: every single sector. But I would just add that, of course,
Speaker 1: you know a lot of the research that BNF does
Speaker 1: on the technology side and our forecasts, UM, a lot
Speaker 1: of that plays really well into the strategies and the
Speaker 1: thought processes of companies that have set in the zero target,
Speaker 1: and they're gonna need to rely on a lot of
Speaker 1: the things that be NF writes about. So that's something
Speaker 1: that will continue to monitor as well as as technology
Speaker 1: costs come down, things like carbon credits get boosts and legitimacy,
Speaker 1: all those types of things are prompts for us to
Speaker 1: continue to look into this more Peppered throughout the report,
Speaker 1: you have several mini tables that include leaders in laggards
Speaker 1: and each sector. Should we expect to see some rankings coming.
Speaker 1: I would certainly love to do that. I will say
Speaker 1: even making those tables alone was very difficult, and I
Speaker 1: think we did have to leave the important caveat under
Speaker 1: each of these tables that all these companies really are
Speaker 1: technically leaders, right UM, And when we call a company
Speaker 1: a laggerate here, they're a laborate among the again eight
Speaker 1: or nine oil and gas companies that are setting a
Speaker 1: carbon neutral goal, or the five big tech companies that
Speaker 1: are really kind of trailblazing here. Um, so I think
Speaker 1: that's important to do. But yeah, I think I think
Speaker 1: it's essential again for investors and sustainability professionals to get
Speaker 1: a better idea of if I look at five targets,
Speaker 1: which of these is the best and which of these
Speaker 1: is the worst. And I think that we are you know,
Speaker 1: BNF is well positioned to make a statement on that. Kyle,
Speaker 1: Thanks for joining us. Happy, happy to talk to you guys.
Speaker 1: Today's episode of Switched On was edited by Rex Warner
Speaker 1: with Grace Stoke Media. Bloombergnia F is a service provided
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