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September 2020 – Recently in a Carbonsink presentation call, with an important Italian industrial group, talking about Carbon Neutrality and Net-zero I received this question:

“Excuse me, but in the end the companies that follow these paths do so for ethical purposes, isn’t there a rule that obliges them?”

I do not deny that I love this question because it gives me the opportunity to explain a concept that I believe is fundamental: today having a concrete strategy on climate change and challenging decarbonization targets does not require the law but your stakeholders (investors, customers … etc. .).

We are talking about a powerful combination of politics, pressure from financial regulators, investors, consumers and market forces that are relentlessly pushing companies to commit to zero-carbon goals.

Today, organizations representing a combined market capitalization of over $ 11 trillion have joined the Financial Stability Board’s Task Force on Climate-Related Financial Disclosures (TCFD).

In Europe, the EU’s Green Deal proposes to enact by law the need for all sectors of the economy to move to net zero emissions by 2050, and the EU’s sustainable finance taxonomy aims to provide a clear framework for investors with reference to this objective. And we’re seeing the rapid development of low-carbon indices and Value-at-Risk climate strategies in financial markets (more on that later).

In this context, we are witnessing an acceleration by companies in the definition of objectives and metrics related to the climate, this is because the decarbonization processes are long, require time and investments, therefore not having a long-term vision and not knowing how to anticipate future regulations. jeopardizes the company and its ability to remain profitable in the future.

The evidence confirms that the companies in the CDP A list are leaders in their reference sectors and very often these companies have Carbon Neutrality and Net-zero objectives.

These companies are increasingly interested in offsetting residual emissions, which could allow them, in the transition to Net-zero, to achieve a significant percentage of objectives while at the same time having the time to carry out research and development activities. and the fundamental technological investments for a robust endogenous decarbonisation of their core activities.

Returning to the initial question today in the context of climate change, it is clear that laws and governments do not need to push companies and the slowdown of the negotiations in Katowice and Madrid (COP24-COP25), where the evident difficulties of governments in finding a agreement on the rules on the Paris Agreement is opposed to an ever stronger leadership of the private sector which, in an inexorable manner, even without clarity on the rules, moves forward with increasingly challenging commitments.

Andrea Maggiani, Managing Director Carbonsink