Low-Carbon Investing Doesn’t Have to Mean Low Return
On October 5, 2020, we were asked by the communications department of Alcoa Corporation to make the following correction: The article contains a statement referencing ELYSISTM , which has two equal partners, Alcoa Corporation and Rio Tinto. The technology has been producing metal without direct CO2 emissions since 2009, and ELYSISTM is focused on scaling up the technology to industrial scale. Apple is not an equity partner but has invested in the technology and has purchased a commercial batch of the metal produced from the R&D-scale process.
Current: For example, miner Rio Tinto is developing technology to produce carbon-neutral aluminum that meets the needs of important clients like Apple and Alcoa.
Revision: For example, Alcoa and Rio Tinto are partners in a joint venture known as ELYSISTM, which is working to ramp up technology to produce aluminum without direct carbon emissions. Apple is an investor and has purchased a commercial batch of this metal.
Investing in businesses that strive for a better climate through decarbonization doesn’t necessarily assume a lower bar for performance. Just the opposite. Besides contributing to a healthier environment, low-carbon equity investing can also offer attractive return potential.
Myriad forces are driving a shift toward low-carbon investing, with governments, corporations and investors all contributing. As a global community bands to combat the problem, more capital flows toward efforts to address climate change. All this creates opportunities for investors to play their part, while doing it well within scope of their long-term financial goals. Investors may no longer need to choose between a better environment or competitive returns, because it’s increasingly possible to have both.
Governments Set the Tone, Companies Step Up
Sharper demand for low-carbon investing is partially linked to intensifying government efforts toward climate improvement. Nations are especially fixed on decarbonizing their economies, and nearly 200 of them support the Paris Agreement, designed to help manage global warming by 2050. Specifically, the accord’s central aim is to strengthen the global response to the threat of climate change by keeping a global temperature rise this century well below 2 degrees Celsius and limiting the temperature increase even further to 1.5 degrees Celsius.
While governments stress urgency, many companies are already way ahead at shrinking their carbon-emissions output. From finance and fossil fuels to transportation and technology, forward-looking businesses see higher value in a lower carbon footprint. And it’s starting to make a difference.
Low-carbon investing covers a lot of ground and industries. Companies’ climate-resilience strategies, for instance, can shift strains and ensure continuity amid climate events. For example, Nestlé now sources core agricultural items like cocoa and sugar from regions less impacted by climate change. Likewise, Home Depot maintains a 24/7 command center to keep customers supplied during hurricanes and other extreme weather.
Low-carbon investing also works hand-in-glove with growth initiatives. For example, miner Rio Tinto is developing technology to produce carbon-neutral aluminum that meets the needs of important clients like Apple and Alcoa. Even some airlines are trailblazing, with Qantas Airways creating new and smarter travel routes and schedules that burn less fuel.