Corporates play a significant role in the race to cut global greenhouse gas emissions. Companies are increasingly using internal carbon prices to channel investment towards low-carbon technologies and energy reduction.
According to not-for-profit, CDP, over 2,000 companies reported using an internal carbon price to measure emissions from their operations (or are planning to do so within two years). These companies include 226 of the largest 500 global companies as measured by the FTSE Global All Cap Index and have a combined market cap of US$27trn.
Consumer and tech giants, such as Unilever and Microsoft, use carbon costs to transition their operations away from carbon-intensive business practices as they target net zero emissions. Investors are paying attention to climate risks — operational, reputational, credit and market. Cutting those risks can ease access to capital. Indeed, the World Bank has stated that investors are starting to divest from fossil fuel and will shun assets that may not be viable in a few years.
Adapted from an article in Financial Management