Net-zero holdouts that stick out like a ‘sore thumb’

While many large companies have made ambitious commitments to achieve net-zero emissions by the middle of the century, their commitments vary and the likelihood that all (or even most) of them will achieve their stated goals remains more than unlikely.

But when you see companies like Exxon Mobil Corp., one of America’s largest corporate emitters, and JPMorgan Chase & Co., the leading global financier of fossil fuel companies, announce their intention to go drastically low carbon, you wonder why not all companies express a public willingness (whether or not they really mean it) to reduce dangerous greenhouse gases.

Last week, the United Nations Intergovernmental Panel on Climate Change issued a stark warning that the world’s emissions must peak immediately to stand a chance of preventing temperatures from rising more than 1.5 degrees Celsius – the target of the United Nations. the Paris Agreement – and so the most disastrous consequences. “This is not a fiction or an exaggeration,” UN Secretary-General Antonio Guterres said in a statement. “It’s what science tells us will result from our current energy policies.”

Fossil fuel suppliers who haven’t revealed (or even have) solid net-zero plans “stick out like a sore thumb,” said Kyle Harrison, chief of sustainability research at BloombergNEF, where he focuses on topics like net-zero targets. , CO2 offsets and clean energy procurement. Phillips 66, Valero Energy Corp, Kinder Morgan and Marathon Petroleum Corp are among the most notable holdouts.

Phillips 66 claims it has “meaningful, measurable and achievable company-wide greenhouse gas reduction targets” and has recently added 2050 targets. Valero claims it has “one of the most comprehensive” transition plans among its peers, and that its initiatives are “well supported by our shareholders.”

Kinder Morgan declined to comment and Marathon did not respond to a request for comment.

By the end of March, 123 of the 167 “focus companies” in the Climate Action 100+ had set a net-zero target, pledging to reduce and/or offset their annual emissions. That’s more than 111 companies in September.

With companies tending to make vague promises to cut emissions, it’s arguable that disclosing detailed plans is a first step toward follow-up.

The 167 “focus companies” – considered to be the world’s heaviest emitters and under pressure from investors to become decarbonised – will collectively need to reduce their emissions by 10.2 billion tons by 2050, which is equivalent to 20% of today’s global emissions, Harrison said. Despite the proliferation of net zero pledges by companies, there are many laggards in the US, China, India and Indonesia when it comes to even making any promises. US oil and gas companies, in particular, have been slow to adopt the right targets, despite great pressure from outside.

While industry giants like Exxon have announced net-zero ambitions, investor groups say the companies haven’t gone far enough. Exxon said in January it will develop roadmaps for its crude oil refineries, chemical plants and other facilities to eliminate so-called Scope 1 and Scope 2 emissions. However, the plan excludes the carbon emitted when customers use Exxon products, such as gasoline and jet fuel, Scope 3 emissions that make up most of the oil industry’s pollution.

The result: Exxon will face seven proposals at its annual meeting next month, including calls for the company to cut sales of oil and natural gas. The company’s board wants shareholders to reject all resolutions.

There is “significant variation” in the quality of net-zero announcements, Harrison said. The targets can vary by length, addressed emissions, regions included and much more, he said.

This means that investors and other stakeholders do not have a standardized way to measure the effectiveness of different net-zero plans. BloombergNEF has developed a program to assess the commitments of 650 of the world’s largest companies in the highest-emission sectors.

The tool projects the emissions reductions companies need to achieve their goals, then assesses the ambition and legitimacy of the commitments based on 13 different metrics, including emissions that have been addressed, such as Scope 2 vs. Scope 3 and whether a company has intermediate emissions. has set goals. The scores reflect the quality of a company’s current net-zero plan, rather than how it will achieve its goal, assuming it delivers on its promise.

In the utility sector, for example, the corporate net-zero assessment tool finds that Iberdrola SA, Southern Co. and Endesa SA rank highest, while Eversource Energy and Edison International are among the laggards, according to BloombergNEF.

While it’s more difficult to quantify, BNEF finds that the best net-zero commitments unlock new customers, develop new products and ultimately create new revenue streams for businesses, Harrison said.

Unfortunately, these are also the drivers behind greenwashing by companies pursuing the financial and public relations benefits of zero commitments without the cost of actually keeping their word.

Still, they’re good strategies for utilities and oil and gas companies looking to keep their zero promises, moving into areas like clean energy and green hydrogen to diversify their businesses, Harrison said. For technology companies, it creates hardware and software to help customers decarbonize, and for materials companies, it develops clean alternatives to their traditional products, such as green steel or aluminum.

“As the business case for the above strategies improves, net-zero targets will increasingly become the norm among companies,” Harrison said.

Sustainable financing in a nutshell

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