Carbon Charges Can Put Investors’ Money Where Their Mouth Is On Climate Change

Over the past decade, many countries and companies have made ambitious pledges to reach net zero greenhouse gas emissions to tackle climate change. For investors, however, the implementation of similar commitments in investment portfolios has led to some unintended outcomes.

Some investors are unwilling to provide capital to high-carbon-emitting companies, even if they are in the process of decarbonizing their businesses. Divestment is the easy route for those looking to quickly get emissions off their books. But while divestment can lead to a greener portfolio, it will not necessarily result in a greener planet since it doesn’t take carbon-intensive assets offline. Investors’ net zero commitments also often have serious caveats such as excluding commingled funds – which comprise a substantial portion of global investments – rendering them effectively hollow or simply disingenuous.