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Net Zero, Paris Agreement, carbon neutrality, energy transition, 1.5-degree pathway… These are some terms we hear a lot and they’re coming up more and more often in the conversations around us, but what do they have in common? They all underscore the need to act for the climate. The idea of net zero, which means an economy that minimizes greenhouse gas emissions as much as possible and offsets those that cannot be avoided, has emerged as a key approach in the battle against global warming. So, what are the implications for businesses, and why is a net zero-oriented investment strategy beneficial for investors?
What does Net Zero mean?
To face the demand from investors and the public, but also for economic reasons, companies are increasingly adopting net zero targets, which means pledging to lower greenhouse gas emissions to a level that is near zero by 2050. This can be done through various methods: switching to renewable energy sources, improving energy efficiency, and cutting down waste. This pledge is not only about lowering operational emissions, it also covers the value chain, including suppliers, customers, and product lifecycle.
If nothing else works, companies can offset their carbon emissions by buying carbon credits that fund projects like planting trees.
The benefits of adopting emission reduction targets
- Reputation: Companies that not only value sustainability but also show a clear dedication to act on the climate crisis are more likely to appeal to consumers and investors.
- Competitiveness: As governments around the world keep introducing stricter regulations and carbon pricing mechanisms, companies that have set net zero emissions targets will be better prepared to comply with the resulting rules and extra costs.
- Innovation: Striving for net zero emissions targets motivates companies to develop and use clean technologies such as renewable energy sources, energy-efficient equipment, and sustainable materials.
Reaching net zero emissions is not just a fad. It’s a chance for businesses to contribute to a more sustainable and resilient future. The idea of just transition aims to make this happen in a way that is as equitable and inclusive by creating good work opportunities and leaving no one behind. This concept is especially relevant in an economy where fossil fuels are a major factor, such as the Canadian economy.
Companies can achieve multiple benefits by committing to net zero emissions targets. They can lower their environmental footprint, enhance their competitive edge, and help protect our planet for the people who will come after us.
How can climate strategies benefit investors?
The world is moving towards net zero, and this will create many challenges and benefits for businesses. An investment portfolio that includes reporting issuers who are advancing towards net zero goals is best prepared to handle the changes that come with the shift to a low-carbon world. When you invest in climate solutions, you help as an investor to shape the economy of the future.
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