Just like they do every year, political and business leaders from around the world converged on the small town of Davos in the canton of Graubünden. Only this time, discussions at the World Economic Forum were focused on climate change. The only person who did not appear interested was the US President, who spoke of climate change “prophets of doom and their predictions of the apocalypse”. Such rhetoric is no longer acceptable in the eyes of the younger generation, who are keeping up the pressure on governing bodies and, in particular, their future employers. A year after more than 10,000 students in France signed the Wake up call on the environment manifesto, a recent survey conducted by the Boston Consulting Group revealed that most (72%) of them feel that businesses are not committed enough in the area of climate change. Davos gave these businesses a platform to set out their aspirations.
Where better than Switzerland to set targets for neutrality (in this case, carbon neutrality)? That is precisely what the pharmaceuticals group AstraZeneca did, announcing that it intended to eliminate carbon emissions by 2025 and be carbon negative across its entire value chain by 2030. The group will use only renewable energies and have a 100% electric vehicle fleet. To become carbon negative, AstraZeneca will launch a reforestation programme called AZ Forest, under which 50 million trees will be planted over the next five years, including one million in France. Starbucks, Microsoft and others followed suit with similar announcements.
But what does being carbon neutral actually mean? According to the European Parliament, “carbon neutrality means having a balance between emitting carbon and absorbing carbon from the atmosphere in carbon sinks”. This will limit global warming to 1.5 degrees, a threshold deemed safe by the IPCC. There are few carbon sinks: forests, oceans and carbon capture and sequestration techniques, which are still quite rare because they are so expensive. Planting trees should be a last resort to offset emissions that could not be eliminated in some other way.
The European Union is aiming for carbon neutrality by 2050 and each business has its part to play. We are convinced that forward-looking businesses with an ambitious climate agenda (anticipating climate risks and associated costs, turning the challenge of climate change into an opportunity by offering solutions, etc.) will attract capital. This is an attractive investment area that represents a source of opportunities and alpha for asset managers and private investors alike.
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