Some of the largest corporations in America are taking action on climate change and profiting handsomely from doing so.
According to the “Power Forward 2.0” report by Calvert Investments, WWF, Ceres, and DGA, 60% of Fortune 100 companies (essentially the largest 100 public companies in the United States) have set greenhouse gas reduction and clean energy targets as of 2013. And more than half of all consumer staples, utilities, materials, and information technology companies in the Fortune 500 have set targets. The Fortune 100 companies alone saved an estimated $1.1 billion in 2012 from climate change related initiatives—and there’s plenty more savings to be realized.
Walmart, for example, has initiatives to increase renewable energy generation and increase energy usage efficiencies. The company is expecting annual savings of $1 billion once the project has been fully implemented. AT&T has already added 7MW of renewable power generation capacity, saving an estimated $65 million, and plans on adding another 10MW in the coming year.
These emissions reduction targets are not simply empty promises. Of Fortune 100 companies with expiring 2012 climate change related goals, 75% exceeded their targets, and another 10% met their targets. Of those companies with expiring goals, 60% set new goals.
Perhaps the reason targets are being met and exceeded so readily is the fact that the economic benefits are substantial. The aforementioned $1.1 billion was saved by just 53 companies with UPS, Pepsi, and United Continental each saving over $100 million. Dell reported saving consumers an additional $1.1 billion through reduced emissions, thanks to design improvements in their products.
As large as they are, these savings represent a fraction of potential savings across the economy. The World Wildlife Fund estimates that under their 3% Solution, an idea in which all U.S. Corporations cut emissions by 3% per year, a cumulative $190 billion could be saved by 2020. These goals are relatively easily achievable, as it is estimated that only 3-4% of capital expenditures need to be allocated to carbon emission reduction to achieve the 3% reduction goal. Corporations have strong incentive to make such expenditures, as some 80% of companies report a higher return on carbon reduction investments than overall capital investments.
It is estimated that climate change could cause more than $200 billion in damages to coastal regions alone and cause significant harm to food production and environments worldwide. By following the 3% Solution guidelines, the U.S. could reduce climate change-causing emissions in line with scientifically set reduction guidelines. The Power Forward 2.0 report provides evidence that achieving this goal is both possible and potentially very profitable.
At First Affirmative, we understand that the ways we save, spend, and invest can dramatically influence both the fabric and consciousness of society. We believe that in addition to the benefits of ownership, investors bear responsibility for the impact our money has in the world. Are you making conscious decisions about the impact of your consumer purchase and investment decisions?
Mention of specific companies or securities should not be considered an endorsement or a recommendation to buy or sell that security. Past performance is no guarantee of future results.
Posted: July 8, 2014