WEBVTT - Amazon, Walmart, and Microsoft Compete to Have the Least Impact 0:00:00.200 --> 0:00:02.880 Hi everyone. So net zero you've probably heard it in 0:00:02.920 --> 0:00:05.040 the news recently. It's when an entity balances out its 0:00:05.080 --> 0:00:08.320 greenhouse gas emissions with other activities that store, reduce, and 0:00:08.560 --> 0:00:10.840 or offset those emissions, so in the end, what you're 0:00:10.840 --> 0:00:14.240 putting up into the airs effectively well nothing. These entities 0:00:14.240 --> 0:00:16.680 can be countries. For example, last year, the UK put 0:00:16.680 --> 0:00:18.799 into law a net zero by twenty fifty target, and 0:00:18.840 --> 0:00:21.439 earlier this year, China made headlines when it announced the 0:00:21.480 --> 0:00:24.239 twenty sixty net zero target, followed soon thereafter by South 0:00:24.320 --> 0:00:26.479 Korea and Japan. But these aren't the only ones. A 0:00:26.600 --> 0:00:29.200 rapidly growing list of countries have announced plans for net zero, 0:00:29.240 --> 0:00:31.720 and you can find extensive coverage on this on countries 0:00:31.720 --> 0:00:34.400 ambitions throughout be net research. But these entities can also 0:00:34.440 --> 0:00:37.440 be companies. Google, Amazon, and Apple have all set ambitious 0:00:37.440 --> 0:00:39.879 net zero targets. Microsoft has gone even further with a 0:00:39.880 --> 0:00:42.360 carbon negative target. But it's not just tech. Groups of 0:00:42.400 --> 0:00:44.280 companies in what seems like every sector have made their 0:00:44.320 --> 0:00:46.760 climate ambition. Is known, but why now? Why are we 0:00:46.800 --> 0:00:49.360 seeing more and more companies make these commitments. This week 0:00:49.360 --> 0:00:52.599 on the show, We've got benf corporate sustainability analyst Kyle Harrison. 0:00:52.680 --> 0:00:55.040 He'll tell us about what's driving corporate net zero targets, 0:00:55.160 --> 0:00:57.800 the why now, what net zero actually means in practice, 0:00:58.120 --> 0:01:00.280 and the bumpy right ahead for those going down this road. 0:01:00.400 --> 0:01:03.000 Our discussion is based on report titled Corporate net Zero 0:01:03.040 --> 0:01:05.760 Targets Primer Jump on the bandwagon being if users can 0:01:05.760 --> 0:01:08.080 get this report on BNF dot com, the BENF mobile app, 0:01:08.160 --> 0:01:10.440 and the Bloomberg terminal as a reminder being to stop 0:01:10.480 --> 0:01:12.600 provide investment or strategy advice, and you can hear the 0:01:12.600 --> 0:01:14.520 full disclaimer at the end of the show. I'm Mark 0:01:14.560 --> 0:01:17.160 Taylor and you're listening to Switch on the BNF podcast. 0:01:23.600 --> 0:01:26.120 Hey Kyle, thank you for coming on the show today. Yeah, 0:01:26.200 --> 0:01:28.240 thanks for having me. You know, it seems like every 0:01:28.240 --> 0:01:29.959 time I look at the news, I see a new 0:01:30.000 --> 0:01:33.520 net zero announcement, whether it be a country or a company. 0:01:33.760 --> 0:01:35.880 We're here today to talk about net zero, So Kyle, 0:01:35.959 --> 0:01:37.800 can you just start us off? What is net zero? 0:01:38.200 --> 0:01:41.360 Net zero is is a company taking all of its 0:01:41.400 --> 0:01:46.119 greenhouse gas emissions across its entire value chain down to zero, 0:01:46.240 --> 0:01:48.960 effectively in a lot of ways, balancing out its emissions 0:01:49.320 --> 0:01:54.560 with some type of activity that reduces or stores those emissions. 0:01:54.800 --> 0:01:56.360 Is that the same as when I hear a country 0:01:56.360 --> 0:01:59.480 say net zero as well? On paper? Um, it should 0:01:59.520 --> 0:02:01.920 be the same things. So you know, there's there's a 0:02:01.920 --> 0:02:05.320 bunch of different terminology that companies are using now when 0:02:05.320 --> 0:02:08.919 they set a net zero target or equivalent. Right. So, um, 0:02:08.960 --> 0:02:11.919 you hear companies say things like carbon neutral or climate 0:02:11.960 --> 0:02:14.799 positive or carbon negative, and a lot of those things 0:02:14.800 --> 0:02:18.919 are used interchangeably, those phrases, but by definition they actually 0:02:18.960 --> 0:02:21.880 all mean different things. So when a company sets a 0:02:21.919 --> 0:02:24.720 net zero target, it should really again apply to their 0:02:24.840 --> 0:02:28.640 entire value chain for all greenhouse gas emissions. But if 0:02:28.639 --> 0:02:32.440 you think about something like carbon neutral, that's only carbon dioxide, right, 0:02:32.480 --> 0:02:36.440 it doesn't include other greenhouse gases like nitrous oxide and methane. 0:02:36.960 --> 0:02:40.440 And then something like carbon negative actually involves taking your 0:02:40.440 --> 0:02:44.320 emissions below zero. So beyond just your emissions netting out 0:02:44.320 --> 0:02:49.280 at zero, you're investing in additional technologies or purchasing carbon credits, 0:02:49.680 --> 0:02:53.080 um that are effectively netting those emissions out below zero. 0:02:53.400 --> 0:02:55.720 So with a lot of these definitions, some of them 0:02:55.760 --> 0:02:58.280 say carbon, some of them say emission. So that distinction 0:02:58.400 --> 0:03:00.440 was really great for you to just point out. It 0:03:00.440 --> 0:03:03.280 looks like a lot of them are measuring the absence 0:03:03.400 --> 0:03:07.560 of emissions or carbon. And there's one term that you 0:03:07.840 --> 0:03:10.560 pointed out in the research note that we're talking about 0:03:10.600 --> 0:03:14.799 today and its climate positive. What does climate positive mean? 0:03:15.160 --> 0:03:17.920 So the key point, the key thing to keep an 0:03:17.960 --> 0:03:20.480 eye out for when you look at the terminology is 0:03:20.880 --> 0:03:24.239 is really the use of carbon or climate. Right, So 0:03:24.320 --> 0:03:26.880 when you think about any target or any phrase that 0:03:26.960 --> 0:03:30.800 uses carbon, again, that just applies to carbon dioxide. When 0:03:30.880 --> 0:03:34.920 the company phrases their target as climate positive or climate negative, 0:03:35.120 --> 0:03:38.200 which is effectively the same thing that applies to all 0:03:38.240 --> 0:03:41.240 greenhouse gas emissions, or at least it should on paper, right. 0:03:41.520 --> 0:03:45.080 So climate positive is very similar to a carbon negative 0:03:45.080 --> 0:03:48.240 goal or a carbon positive target, but again it just 0:03:48.320 --> 0:03:52.280 extends to methane and things like nitrous oxide as well 0:03:52.320 --> 0:03:54.840 as carbon dioxide. So that's kind of the key differentiator. 0:03:55.240 --> 0:03:57.640 But if you think about this, I mean from an 0:03:57.640 --> 0:04:00.960 investor standpoint, it becomes really different coal to actually sift 0:04:01.000 --> 0:04:04.480 through all these targets and compare them apples to apples, right, 0:04:04.640 --> 0:04:06.760 investors actually need to go ahead and look at these 0:04:07.000 --> 0:04:10.800 companies sustainability reports and those announcements specifically to see what 0:04:10.880 --> 0:04:13.760 those targets entails. And that's definitely one of the things 0:04:13.800 --> 0:04:17.000 that is potentially holding this market back at the current time. 0:04:17.200 --> 0:04:20.440 Let's get into the standards and and certification in a second, 0:04:20.440 --> 0:04:23.480 but really, can we go back to why our companies 0:04:23.520 --> 0:04:26.280 doing this at all? Is it pr is it having 0:04:26.279 --> 0:04:30.280 an edge in their competitors, Is it the consumer value proposition, 0:04:30.560 --> 0:04:33.360 or does it make them more investable or a combination 0:04:33.400 --> 0:04:35.919 of the all of the above. It's a combination of 0:04:35.920 --> 0:04:38.960 all the above. I would say that the biggest driver 0:04:39.120 --> 0:04:43.280 is definitely that investor pressure, right, So increasingly investors want 0:04:43.320 --> 0:04:47.160 to put their money in companies that mitigate their susceptibility 0:04:47.200 --> 0:04:50.359 to what we call climate risk and transition risk. So 0:04:50.480 --> 0:04:54.040 climate risk is your exposure to these physical climate related 0:04:54.040 --> 0:04:57.880 events like forest fires and droughts and electricity grid blackouts. 0:04:58.440 --> 0:05:01.240 And then transition risk is as we pivot to a 0:05:01.279 --> 0:05:04.240 low carbon economy and you have more low carbon regulation, 0:05:04.720 --> 0:05:09.560 you have changing consumer preferences. Companies again become increasingly susceptible 0:05:09.640 --> 0:05:12.360 to these types of risks. So by setting a net 0:05:12.440 --> 0:05:16.800 zero goal or an emission reduction strategy more broadly, companies 0:05:16.839 --> 0:05:19.960 actually make themselves safer to invest in because they're mitigating 0:05:20.160 --> 0:05:22.560 their exposure to some of those risks. If I'm an 0:05:22.560 --> 0:05:26.640 oil and gas company and I start investing in clean 0:05:26.720 --> 0:05:29.919 power or electric vehicles, like some of these oil majors 0:05:29.960 --> 0:05:32.360 are already doing, those are businesses that we think are 0:05:32.400 --> 0:05:34.880 going to you know, make up a larger part of 0:05:34.920 --> 0:05:37.960 the low carbon economy moving forward, more so than you know, 0:05:38.040 --> 0:05:41.080 fossil fuels. So that's, you know, one great example of 0:05:41.120 --> 0:05:43.960 how companies can kind of pivot and be more attractive 0:05:43.960 --> 0:05:47.560 from an investment standpoint. So net zero targets are really 0:05:47.640 --> 0:05:49.800 kind of the cream of the crop or the gold 0:05:49.839 --> 0:05:52.920 standard when it comes to emission reductions goals. So if 0:05:52.920 --> 0:05:55.040 you want to make an investor happy, really the best 0:05:55.040 --> 0:05:57.360 way to do it is to set a net zero target. 0:05:57.800 --> 0:05:59.880 What I would say, though, and you mentioned this earl 0:06:00.000 --> 0:06:03.200 of mark, is there's definitely a degree of one upsmanship here. 0:06:03.600 --> 0:06:07.600 So via a large technology company or utility or an 0:06:07.600 --> 0:06:10.719 oil and gas company, one of your biggest competitors sets 0:06:10.760 --> 0:06:12.960 in net zero goal. Um, that's driven a lot of 0:06:12.960 --> 0:06:15.800 other companies to set targets of their own to kind 0:06:15.800 --> 0:06:18.320 of keep pace with their competitors. So really it is 0:06:18.360 --> 0:06:22.040 a combination of many things. But I would say satiating 0:06:22.040 --> 0:06:25.640 investors and making investors happy is the biggest driver, followed 0:06:25.680 --> 0:06:27.480 by you know the fact that it's a great way 0:06:27.520 --> 0:06:30.200 to one up your peers and sustainability, so net zero 0:06:30.240 --> 0:06:33.160 peer pressure. So actually that leads me to another thought 0:06:33.160 --> 0:06:35.240 because if I'm looking at all of these kind of 0:06:35.400 --> 0:06:37.800 in theory and isolation, I'm watching the news cycle and 0:06:37.839 --> 0:06:41.640 I'm seeing different companies make net zero targets. Which industries 0:06:42.200 --> 0:06:46.160 are kind of leading in these target making endeavors. It's 0:06:46.200 --> 0:06:49.720 a bit cliche, but I would say that technology companies 0:06:49.920 --> 0:06:52.760 are definitely the leaders here. So they're not as emissions 0:06:52.800 --> 0:06:56.320 intensive as again companies in the oil and gas sector 0:06:56.240 --> 0:07:00.600 or utilities, but technology companies are setting to targets that 0:07:00.640 --> 0:07:03.520 need to be achieved much earlier than other sectors. So 0:07:03.560 --> 0:07:05.600 if you look at some of the leading tech companies 0:07:05.600 --> 0:07:10.240 that have set these goals like Google, Microsoft, Facebook, and Amazon, 0:07:10.960 --> 0:07:15.200 their targets are expected to be met in and that's 0:07:15.280 --> 0:07:17.920 ten years or twenty years earlier than the Paris Agreement. 0:07:18.400 --> 0:07:20.720 But it's also ten or twenty years earlier than most 0:07:20.760 --> 0:07:24.080 other net zero targets that are being set in other sectors. 0:07:24.400 --> 0:07:27.200 And why is this? They're just more ambitious, I would 0:07:27.200 --> 0:07:29.640 say part of it is the fact that they're they're 0:07:29.640 --> 0:07:32.280 just setting more ambitious goals. The other important thing to 0:07:32.320 --> 0:07:36.080 note is a huge portion of the carbon footprints for 0:07:36.120 --> 0:07:39.400 tech companies is what we would classify as scope too, 0:07:40.240 --> 0:07:42.760 and that means it's your indirect emissions that come from 0:07:42.800 --> 0:07:46.240 the electricity grid. So the most effective way to reduce 0:07:46.280 --> 0:07:49.080 your scope to emissions is to purchase clean energy. So 0:07:49.160 --> 0:07:51.640 that's kind of my long winded answer of saying they 0:07:51.680 --> 0:07:54.680 have a one size fits all solution to reduce a 0:07:54.760 --> 0:07:57.440 large portion of their carbon footprint. But the last thing 0:07:57.440 --> 0:08:00.440 I want to highlight that really makes the big tech 0:08:00.480 --> 0:08:04.360 companies stand out is there again setting net zero targets 0:08:04.400 --> 0:08:07.280 that also address their Scope three emissions, and those are 0:08:07.320 --> 0:08:10.680 your indirect emissions that come up and downstream along the 0:08:10.760 --> 0:08:13.320 value chain. So if you think of a company like Apple, 0:08:14.240 --> 0:08:18.240 that's from its product manufacturing upstream, so those large companies 0:08:18.240 --> 0:08:21.520 like Fox con and Taiwan Semiconductor, Whereas for an oil 0:08:21.560 --> 0:08:24.600 and gas company, their Scope three emissions largely come from 0:08:24.640 --> 0:08:27.480 the use of their products downstream, so think of things 0:08:27.560 --> 0:08:30.160 like burning road fuel and jet fuel. So a lot 0:08:30.200 --> 0:08:33.480 of tech companies are setting scope three targets as well. 0:08:33.559 --> 0:08:36.360 That actually ultimately end up at zero, and that's something 0:08:36.400 --> 0:08:38.240 that a lot of other sectors have not yet done. 0:08:38.640 --> 0:08:41.000 So they deserve high marks in that regard as well. 0:08:41.120 --> 0:08:44.600 I've been wondering why now. I still can't quite get it. 0:08:44.679 --> 0:08:47.600 Is it more pressure you feel like you hear these 0:08:47.640 --> 0:08:50.040 announcements all the time, as Dana said, right, is it 0:08:50.080 --> 0:08:53.520 more pressure from investors? Or is it the one upsmanship 0:08:53.600 --> 0:08:56.280 you know that's driving all these announcements now? Or did 0:08:56.280 --> 0:08:58.240 Paris and the I p c C in the one 0:08:58.280 --> 0:09:01.079 point five degree scenario have a huge impact? I mean, 0:09:01.200 --> 0:09:03.880 is this the resulting catalyst from that? So on the 0:09:03.920 --> 0:09:08.360 investor from you have massive asset managers and investors that 0:09:08.400 --> 0:09:12.120 are setting what we would call net zero finance dimissions. 0:09:12.160 --> 0:09:15.080 And I am aware that I'm throwing another term into 0:09:15.080 --> 0:09:18.320 the mix, heer, I apologize, But asset managers like black 0:09:18.440 --> 0:09:21.760 Rock and banks like Morgan Stanley are now making commitments 0:09:22.080 --> 0:09:26.840 where the emissions of their portfolios by will also be 0:09:26.920 --> 0:09:29.280 net zero um and again we call that net zero 0:09:29.320 --> 0:09:31.600 finance dimissions. Okay, So if you want to stay in 0:09:31.679 --> 0:09:34.440 you gotta you gotta perform exactly, And a lot of 0:09:34.480 --> 0:09:38.200 these companies are joining their specific initiatives for the investment 0:09:38.240 --> 0:09:41.640 community UM that that focus on these areas. So a 0:09:41.679 --> 0:09:44.120 great example is what we would call the Climate Action 0:09:44.160 --> 0:09:46.960 one hundred plus and that's a group of now over 0:09:47.080 --> 0:09:50.960 five hundred investors and asset managers that are pledging to 0:09:51.000 --> 0:09:55.360 get their portfolio companies to report better environmental, social and 0:09:55.400 --> 0:09:59.520 governance data but also to reduce their emissions. So again, 0:09:59.559 --> 0:10:01.640 you know, a lot of it is being catalyzed by 0:10:01.640 --> 0:10:06.320 that investor pressure. But the other exciting component to this is, 0:10:06.360 --> 0:10:08.439 and you know, Danny, you mentioned this in the beginning, 0:10:09.080 --> 0:10:12.080 you're starting to see a lot of countries now putting 0:10:12.080 --> 0:10:15.000 forward legislation for net zero um So, in the last 0:10:15.080 --> 0:10:18.760 month we've seen China, South Korea, and Japan all put 0:10:18.800 --> 0:10:21.600 forward legislation for a net zero target. And what that's 0:10:21.640 --> 0:10:23.640 really gonna do is it's going to kind of open 0:10:23.679 --> 0:10:27.400 the door and really trail blaze the way for the 0:10:27.440 --> 0:10:30.600 private sector within those countries to go ahead and set 0:10:30.600 --> 0:10:33.040 in net zero goes of their own. Because China is 0:10:33.040 --> 0:10:36.120 going to need to expedite it's retirement and fossil fuels, 0:10:36.400 --> 0:10:38.839 it's going to need to expedite it's clean energy, it's 0:10:38.880 --> 0:10:41.760 e V fleet rollouts, all those types of things are 0:10:41.760 --> 0:10:44.880 going to benefit private sector players. You know, that's further 0:10:44.960 --> 0:10:48.480 incentive for these companies to set targets of their own. Well, so, yeah, 0:10:48.520 --> 0:10:51.120 let's talk a little bit about accountability, because you referenced 0:10:51.160 --> 0:10:53.560 kind of two things just now, which is one the 0:10:53.600 --> 0:10:56.880 net zero targets that countries are making, which invariably does 0:10:56.920 --> 0:10:58.920 have to do with the companies that operate within it, 0:10:59.240 --> 0:11:03.600 and to financial community, which is demanding more information and 0:11:03.800 --> 0:11:06.880 presumably a lot of these companies to join and make 0:11:06.960 --> 0:11:10.480 commitments with third parties that are actually kind of at 0:11:10.559 --> 0:11:13.120 least systematizing this stuff or making it transparent in a 0:11:13.120 --> 0:11:15.760 way that they can use. So where do you think 0:11:15.840 --> 0:11:18.319 most of the pressure is and is going to come from? 0:11:18.360 --> 0:11:20.600 Will it be the finance community, will it be governments, 0:11:20.679 --> 0:11:23.280 or will it be something else? A lot of it 0:11:23.320 --> 0:11:26.600 will again come from from the finance community, but you 0:11:26.600 --> 0:11:29.000 do have a number of initiatives, many of which are 0:11:29.040 --> 0:11:31.880 competing with each other, that are now being rolled out 0:11:31.960 --> 0:11:36.040 to help standardize, you know, this net zero movement. So 0:11:36.080 --> 0:11:39.239 I guess we can kind of start from the broadest level. 0:11:39.280 --> 0:11:41.719 So the u N has convened what they call Race 0:11:41.800 --> 0:11:44.920 to net Zero. That's now a group of over eleven 0:11:45.960 --> 0:11:48.520 corporations that have set some form of a net zero 0:11:48.559 --> 0:11:50.959 target mark and Dan, I think you guys will will 0:11:51.000 --> 0:11:53.520 get this analogy. But you know when you're growing up 0:11:53.520 --> 0:11:56.040 and basically all the kids in in the United States, 0:11:56.080 --> 0:11:58.520 they go ahead and they play Little League baseball, right, 0:11:58.800 --> 0:12:01.679 and everyone is accepted into that Little League Baseball league. 0:12:01.880 --> 0:12:03.240 That's kind of the way that I would think of 0:12:03.440 --> 0:12:06.880 Race to Zero. It doesn't really have any stringent rules. 0:12:07.080 --> 0:12:09.240 Any company can join UM, and you have a lot 0:12:09.240 --> 0:12:10.960 of kind of mom and pop shops that are part 0:12:10.960 --> 0:12:13.319 of that UM. So that's kind of at the broadest level. 0:12:14.160 --> 0:12:16.120 And one of the things that Race to Zero wants 0:12:16.120 --> 0:12:18.560 to do is kind of help move the needle on policy. 0:12:18.679 --> 0:12:21.520 So if you can kind of show up to the 0:12:21.559 --> 0:12:25.760 negotiating table as a consortium of over a thousand companies UM, 0:12:25.760 --> 0:12:27.400 the hope there is that it can open the door 0:12:27.480 --> 0:12:30.520 for more access to clean energy buying and things like 0:12:30.559 --> 0:12:32.680 e V procurement. But then you also have a number 0:12:32.720 --> 0:12:36.400 of actually private set of lead initiatives. So two ones 0:12:36.440 --> 0:12:39.480 that I would highlight our Amazon's Climate Pledge UM and 0:12:39.520 --> 0:12:42.320 they even named their new arena in Seattle after this 0:12:42.360 --> 0:12:44.959 climate Pledge, So that's a group of companies that have 0:12:45.280 --> 0:12:48.960 planned or planned to go net zero. Then you also 0:12:49.040 --> 0:12:52.040 have transformed to net zero, which is rolled out by Microsoft. 0:12:52.200 --> 0:12:55.640 So these types of corporate lead initiatives are you know, 0:12:56.080 --> 0:12:59.120 partially driven by you know, a need for better PR. 0:12:59.520 --> 0:13:02.320 So as a company, I can align myself with a 0:13:02.640 --> 0:13:05.320 with a leader like Microsoft or Amazon, and that really 0:13:05.360 --> 0:13:08.040 does help from a PR standpoint. But what I would 0:13:08.040 --> 0:13:11.160 say that's really exciting about these these private sector lead 0:13:11.200 --> 0:13:14.600 initiatives is um they facilitate collaboration and that's one of 0:13:14.600 --> 0:13:18.040 the reasons they've been created. So for example, Amazon went 0:13:18.080 --> 0:13:22.800 ahead and purchased electric vehicles from Mercedes Benz, which is 0:13:22.920 --> 0:13:25.440 also part of the Climate Pledge, and they said that 0:13:25.440 --> 0:13:28.920 that transaction was actually facilitated by these two companies joining 0:13:28.920 --> 0:13:32.160 this initiative together. You know, they're planning for very similar 0:13:32.160 --> 0:13:35.960 collaboration to happen between the companies. So these private sector 0:13:36.040 --> 0:13:38.920 initiatives are are really exciting. But the one that I 0:13:38.960 --> 0:13:43.800 think any relevant stakeholder and investor, or a corporate sustainability practitioner, 0:13:44.040 --> 0:13:45.880 the one that everyone should be keeping an eye out on, 0:13:46.240 --> 0:13:48.440 is the net zero framework that's going to be rolled 0:13:48.440 --> 0:13:51.280 out by the Science Based Targets Initiative. So they're gonna 0:13:51.320 --> 0:13:55.080 be basically create a methodology in the next year or so. UM, 0:13:55.080 --> 0:13:57.840 that's gonna lay out a clear pathway for Again, what 0:13:58.040 --> 0:13:59.760 is net zero? So if you want to set a 0:13:59.840 --> 0:14:03.079 net zero target as part of the Science Based Targets initiative, 0:14:03.120 --> 0:14:06.120 it needs to meet certain criteria. But they're also laying 0:14:06.120 --> 0:14:08.840 out clear guidelines on how you actually achieve that goal. 0:14:09.320 --> 0:14:11.640 So what type of carbon credits you can use, what 0:14:11.720 --> 0:14:14.280 type of technologies you can use, how you have to 0:14:14.320 --> 0:14:16.680 reduce your gross emissions before you can use any of 0:14:16.679 --> 0:14:19.400 these technologies. All of that type of stuff is going 0:14:19.440 --> 0:14:22.240 to be made very clear, um and laid out within 0:14:22.280 --> 0:14:25.000 this Science Based Targets framework. UM. And I think you 0:14:25.040 --> 0:14:27.680 know to your point data about accountability. UM, that's going 0:14:27.720 --> 0:14:29.720 to go a long way and making sure that these 0:14:29.760 --> 0:14:33.080 companies are held accountable. Two questions, why are you confident 0:14:33.120 --> 0:14:36.080 in the Science Based Targets initiatives in particular? And can 0:14:36.120 --> 0:14:37.600 you give us a preview of what some of those 0:14:37.600 --> 0:14:40.160 things are carbon credits are or whatever they're called in 0:14:40.200 --> 0:14:43.240 there that a company can use to actually reach the target. 0:14:43.480 --> 0:14:46.360 So the reason I'm confident in the Science Based Targets 0:14:46.400 --> 0:14:49.800 Initiative is because you know, we have historical data. I mean, 0:14:49.800 --> 0:14:53.120 this is an initiative that has existed for for several 0:14:53.200 --> 0:14:55.560 years now, right, and at this point you have over 0:14:55.600 --> 0:14:59.000 a thousand companies that have pledged to set what we 0:14:59.040 --> 0:15:01.640 call a science based target, and that means that they 0:15:01.680 --> 0:15:04.640 will reduce their emissions in line with a well below 0:15:04.720 --> 0:15:07.600 two degree scenario, which is outlined in the Paris Agreement. 0:15:08.040 --> 0:15:11.200 So theoretically, on paper, the way the Science Based Targets 0:15:11.240 --> 0:15:14.400 Initiative works is if all the countries in the world 0:15:14.360 --> 0:15:16.760 they're not doing their part to get us well below 0:15:16.840 --> 0:15:20.680 two degrees, what if every single private sector player in 0:15:20.720 --> 0:15:22.800 the entire world went ahead and set a target of 0:15:22.800 --> 0:15:25.680 their own. That's the way that the Science Based Targets 0:15:25.680 --> 0:15:29.600 Initiative is expected to work. This campaign, this initiative has 0:15:29.640 --> 0:15:33.000 more momentum than any other sustainability commitment that currently exists 0:15:33.040 --> 0:15:36.080 out there. So this year you've had over four companies 0:15:36.560 --> 0:15:39.240 pledged to set one of these goals. For the net 0:15:39.360 --> 0:15:43.600 zero component of the Science Based Targets Initiative, it's basically 0:15:43.600 --> 0:15:46.480 going to be taking those goals that companies are setting 0:15:46.520 --> 0:15:49.480 in line with the Parish trajectory and basically taking it 0:15:49.520 --> 0:15:52.560 a step further. Um. So, Mark, you talked about kind 0:15:52.560 --> 0:15:56.760 of the ways in which the Science Based Targets Initiative 0:15:57.080 --> 0:16:00.520 outlines that you can hit your goal. First, inform a 0:16:00.520 --> 0:16:02.760 a company that would join this initiative, they need to 0:16:02.760 --> 0:16:05.080 go ahead and they need to reduce their gross emissions 0:16:05.640 --> 0:16:08.440 in line with that Powish trajectory. Um. And again that's 0:16:08.480 --> 0:16:11.640 something that any company with a science based target already 0:16:11.640 --> 0:16:14.560 has to do. And then only then once you've kind 0:16:14.560 --> 0:16:17.720 of reduced your gross emissions by you know, again pivoting 0:16:17.800 --> 0:16:21.720 your your business model away from emissions intensive practices or 0:16:21.760 --> 0:16:25.200 investing in low carbon technologies. Once you've done those types 0:16:25.240 --> 0:16:28.360 of things, you can go ahead and purchase carbon credits 0:16:28.400 --> 0:16:30.920 to kind of net out the remainder of your emissions 0:16:30.960 --> 0:16:34.360 and take them to zero. But the key differentiator that 0:16:34.440 --> 0:16:38.240 the Science Based Targets Initiative lays out is only carbon 0:16:38.280 --> 0:16:41.880 credits that actually remove carbon from the atmosphere or sequester 0:16:41.960 --> 0:16:45.080 or carbon can be used to achieve that target. So 0:16:45.120 --> 0:16:47.640 if you think about a company like Walmart that just 0:16:47.720 --> 0:16:49.680 made this announcement a couple of months ago that they're 0:16:49.680 --> 0:16:54.800 going to basically planned several million acres of forest UM 0:16:54.840 --> 0:16:58.120 and also restore I think a million square miles of ocean. 0:16:58.320 --> 0:17:01.200 That type of activity will go ahead and create carbon 0:17:01.240 --> 0:17:05.400 credits that again store sequester carbon. So those credits would 0:17:05.400 --> 0:17:08.320 be accepted under the science Based Targets initiative. But if 0:17:08.359 --> 0:17:11.280 I purchase a carbon credit that simply offsets my mission, 0:17:11.680 --> 0:17:15.639 say from a clean energy project or clean cookstone distribution, 0:17:16.160 --> 0:17:19.520 those would not be considered a viable means to achieve 0:17:19.560 --> 0:17:22.320 your science based target. So they're gonna set again a 0:17:22.400 --> 0:17:25.960 very stringent methodology for what is and what isn't accepted 0:17:26.000 --> 0:17:28.280 to achieve these goals UM. And again, I think that's 0:17:28.280 --> 0:17:32.439 going to turn this net zero landscape that we you know, 0:17:32.520 --> 0:17:34.399 talk about in our report and we define as the 0:17:34.440 --> 0:17:38.320 wild West of sustainability targets UM. It's going to take 0:17:38.320 --> 0:17:40.600 this from a wild West to kind of again a 0:17:40.640 --> 0:17:47.920 really standardized emission reductions movement. Are planting trees and doing 0:17:47.920 --> 0:17:50.760 those sorts of projects in addition to actually working on 0:17:50.920 --> 0:17:54.280 your businesses more direct emissions to what they do day today. 0:17:54.440 --> 0:17:57.399 Is that proving to be increasingly popular? It is if 0:17:57.440 --> 0:18:01.560 you look at the existing landscape of of carbon credits 0:18:01.800 --> 0:18:05.680 UM in the market. Forestry projects, which we broadly abbreviate 0:18:05.760 --> 0:18:09.160 as red plus because there's so many different kind of 0:18:09.840 --> 0:18:13.679 projects that fit into this category, including agriculture. Red plus 0:18:13.680 --> 0:18:17.200 projects make up about a quarter of the total carbon 0:18:17.200 --> 0:18:20.640 offset market today. That sector is growing faster than any 0:18:20.640 --> 0:18:24.800 other one. So energy generation projects, you know, from clean energy, 0:18:25.280 --> 0:18:28.199 those are the most common projects that exist, but a 0:18:28.200 --> 0:18:31.520 lot of those are legacy projects and they've existed for 0:18:31.520 --> 0:18:33.960 for you know, a decade now or more than a 0:18:34.000 --> 0:18:37.639 decade um, and they actually came from compliance carbon markets 0:18:37.640 --> 0:18:40.160 long ago, and some of those credits have been earmarked 0:18:40.240 --> 0:18:43.440 for corporations to use. So that's the biggest sector now. 0:18:43.480 --> 0:18:45.600 But if you look at what's growing the fastest, it's 0:18:45.640 --> 0:18:49.840 definitely forestry projects um. And you know, there's the opportunity 0:18:49.920 --> 0:18:53.920 to generate carbon credits from forestry projects all around the world. 0:18:54.040 --> 0:18:56.399 I mean, that's definitely one of the exciting um and 0:18:56.440 --> 0:18:58.640 one of the biggest drivers for for companies to look 0:18:58.640 --> 0:19:01.200 at this segment of the mark it. You mentioned ocean 0:19:01.200 --> 0:19:04.600 as well, So is that like areas where they're seaweed 0:19:04.640 --> 0:19:08.040 and seaweed is seen as a absorbing carbon or is 0:19:08.080 --> 0:19:10.560 there something else there? So I would say that anything 0:19:10.600 --> 0:19:13.280 related to ocean is kind of a niche part of 0:19:13.320 --> 0:19:16.720 the carbon markets now, you know. Again, I think Walmart's 0:19:16.720 --> 0:19:19.359 announcement was pretty groundbreaking. They want to be what they 0:19:19.400 --> 0:19:23.640 call a regenerative company moving forward. I don't think that 0:19:23.800 --> 0:19:28.680 ocean and water related carbon projects are going to be 0:19:28.760 --> 0:19:31.200 this this huge sector moving forward. I think again, there's 0:19:31.200 --> 0:19:33.639 gonna be a lot more focus on on four stream 0:19:33.680 --> 0:19:37.560 agriculture because there's a huge opportunity to sequester and store 0:19:37.720 --> 0:19:40.600 large amounts of carbon. But yeah, that's definitely you know, 0:19:40.720 --> 0:19:43.239 A way that companies can kind of again serve as 0:19:43.240 --> 0:19:46.560 a trailblazer in this area is is purchasing carbon credits 0:19:46.720 --> 0:19:49.960 from brand new projects that you know, other companies aren't 0:19:49.960 --> 0:19:53.200 already looking into. One of my favorite episodes we've done 0:19:53.480 --> 0:19:55.159 it was a few months ago with you and it 0:19:55.200 --> 0:19:58.359 was about carbon offsets and we talked about red plus 0:19:58.400 --> 0:20:03.160 in there, and we talked about the difficulty of certifying 0:20:03.240 --> 0:20:06.600 these projects. I imagine it's the same thing here, right, 0:20:06.680 --> 0:20:10.040 Who is going to be certifying these carbon credits that 0:20:10.160 --> 0:20:13.640 the company says they have or that an investor wants 0:20:13.640 --> 0:20:16.680 to see is proven. So in terms of carbon credits, 0:20:16.800 --> 0:20:20.399 all the certification will be carried out by the four 0:20:20.560 --> 0:20:25.119 major registries that kind of preside over the voluntary carbon market. 0:20:25.280 --> 0:20:28.960 So the Verified Carbon Standard is the largest. Then you 0:20:29.000 --> 0:20:32.080 have the Gold Standard, the Climate Action Reserve, and the 0:20:32.119 --> 0:20:36.720 American Carbon Registry. So those four markets will again really 0:20:36.880 --> 0:20:39.600 make sure that every carbon credit that is that is 0:20:39.680 --> 0:20:43.760 created comes from a verified, legitimate project. So companies will 0:20:43.800 --> 0:20:46.720 will continue to rely on those registries. But there's going 0:20:46.760 --> 0:20:50.480 to need to be a channel of communication opened between 0:20:50.520 --> 0:20:52.960 some of these net zero initiatives that I've talked about, 0:20:53.280 --> 0:20:56.640 like the Science Based Targets initiative and Transformed to net 0:20:56.720 --> 0:21:00.280 zero and some of these other corporate lead initiatives. There's 0:21:00.320 --> 0:21:02.280 going to need to be, you know, again an open 0:21:02.359 --> 0:21:05.280