View this email in your browser

 Market Mysteries of the week

   Are corporate net-zero pledges for real? 

Answer:

Not all sustainability pledges are the same.

As with most things in the financial world,

knowing the language is essential

. A net-zero pledge using Science Based Targets is the gold standard. Carbon neutrality is better than nothing.

Are all companies talking about the same emissions?

Not all emissions are the same.

As corporations pledge to reduce their greenhouse gas emissions, pay attention to the scope of their promises. A business's greenhouse gas emissions can be classified into three scopes based on the most widely-used international accounting tool, the

Greenhouse Gas (GHG) Protocol

.

Scope 1 emissions are direct emissions

that result from the business's core operations - their factories, vehicles, etc.

Scope 2 emissions refer to their energy use

- whether they get their electricity from coal-fired power plants.

Scope 3 covers indirect emissions

, typically much bigger and harder to report. It includes the scope 1 & 2 emissions from all of their suppliers, the emissions from their products, and even things like employee commutes.

As we've mentioned

, even though scope 3 emissions account for

70% or more of a company's total footprint,

they are

not required

to report under the GHG Protocol.

Net-zero vs. carbon neutral, what's the difference?

While the terms are often used inconsistently and interchangeably, they have very different meanings in the corporate world.

Carbon neutrality means balancing the amount of carbon emitted and absorbed

from the atmosphere.

Net-zero takes this idea further

by expanding to all greenhouse gasses, including methane and sulfur dioxide, and requiring companies to actually reduce their emissions as much as possible, restricting the use of carbon offsets.

Carbon neutral can refer to just direct emissions, while net zero typically means reducing indirect emissions.

The Science-Based Targets Initiative Net-Zero Standard is the leading benchmark

for companies looking to reduce their direct and indirect emissions as much as possible, offsetting anything that can't be reduced. The net-zero standard demonstrates companies are willing to align with the

Paris Agreement's

goal to limit the most devastating effects of climate change.

Why are carbon offsets such an important factor?

Whether and how companies use offsets speaks to the quality of their pledges.

As we've discusse

d, a

carbon offset project reduces the amount of carbon released into the atmosphere or removes existing emissions from the air

. Investments in offset projects are often packaged into purchasable financial instruments called carbon credits, which make it easy for companies to throw money at the problem.

Companies pledging to be carbon neutral may use any offset projects,

but to achieve net zero, companies can only use

verified removal projects

.

Reduction projects

include anything that might help avoid additional emissions, like saving a forest from destruction or building a solar energy plant.

Removal projects

must decrease the amount of carbon in the atmosphere by increasing natural sequestration by planting forests or mangroves or pulling it from the air with technology like

Direct Carbon Capture.

The net-zero standard also restricts the use of offsets

to only emissions that cannot be reduced because there is a lot of

skepticism

about the effectiveness of carbon offsets. Not every project can be certified, so their quality and impact remain unverified. Companies might say they are offsetting 10 tons of carbon by planting 60 trees without actually proving that those 10 tons of carbon are permanently taken out of the atmosphere. Even

certified projects

have outcomes that are difficult to predict in the long term.

Is it easy to spot the difference in pledges?

Paying attention to the terminology is everything.

Microsoft

is an example of an ambitious commitment to sustainability. The tech giant has pledged to be carbon negative by 2030 and to have removed its historical carbon emissions by 2050. Microsoft is also investing $1 billion towards a climate innovation fund to accelerate carbon reduction, capture, and removal technologies worldwide. These goals will include full Scope 1, 2, and 3 emissions.

Pepsi

has made a strong commitment. The snack and beverage maker has explicitly stated that it will reduce Scope 1 and 2 emissions by 75% and Scope 3 emissions by 40% by 2030, with an overall pledge to achieve net-zero emissions by 2040. Pepsi has indicated that its 2030 goal will not be supported by carbon offset projects.

Exxon Mobil

is a good example of a carefully-worded commitment. The fossil fuel giant has pledged to achieve net-zero greenhouse gas emissions in its operations by 2050. However,

the pledge solely includes Scope 1 and 2 emissions

while neglecting Scope 3 emissions. As an oil and gas company, the vast majority of its emissions come from the use of its products, not from its facilities. It's a nice headline, but the company is not taking responsibility for its full impact on the planet.

We need to learn the language to hold corporations accountable for their impacts on our planet.

As we've highlighted before,

we're running out of time

to avoid the most devastating effects of climate change. Has your company made a net-zero pledge yet?

⚡The Share Scoops Team

P.S. For a limited time, we're including our whole mailing list in our Market Mysteries Explained weekly email as a thank-you to our earliest supporters. As we grow closer to launching our beta platform, you'll be the first to gain access. We can't wait to show you!

Share the scoop!

1. Share your unique link with friends & coworkers (forward or copy)

2. When they sign up you unlock exclusive rewards

3. Keep on sharing to unlock more rewards

Forward your unique link:

*|SHAREURL|*

You have made referrals

Click for more ways to share & track your progress!