Beyond net zero: the goal of climate positivity
As a new investor alliance targets climate positivity, Atharva Deshmukh examines this concept and discusses what will be required to achieve it.
On 18 November 2022 the non-profit campaign group One Earth announced the launch of a new investor alliance called the “Climate + Positive Investing Alliance” (C+PIA). The core agenda of the alliance is to push investors to go beyond net zero into “climate-positive” mode.
By signing up to be climate positive, investors will align their portfolios with the goal of “reducing more greenhouse gas emissions than what is emitted”. Additionally, investors will commit to achieve climate positivity by 2035, a target that will include a comprehensive emissions assessment for Scopes 1, 2 and 3.
Ian Monroe, president and chief investment officer at Etho Capital, says that this new alliance is aimed at showing the possibility and profitability of being climate positive. “The alliance [C+PIA] is showing that getting to climate positive can be both possible and profitable now, taking away excuses for denial and delay. C+PIA members are helping forge the path that science says the rest of the investing world must quickly follow”.
Being climate positive or net positive is an idea already embraced by some companies. For instance, Ikea, the Swedish furniture company, has said it will be climate positive by 2030. Ikea’s plan is to do so by focusing on 100% renewable energy supply and sustainable materials. Microsoft has a similar target of being “carbon negative” by 2030. The company’s thinking is – “those of us who can afford to move faster and go further should do so”.
However, the idea of climate positivity is multidimensional and less than straightforward. Broadly speaking, there are two parts to the puzzle.
Net zero by 2050 is a ‘decade too late’
If one were to survey the entire universe of net-zero commitments, the year 2050 would become a familiar date. Most companies and investors seem to think that carbon neutrality by 2050 is a credible climate target. But the science can differ on this.
At the heart of the push for climate positivity is the idea of “correcting the climate maths”, suggesting that if you follow the numbers, net zero by 2050 is a decade too late.
According to Karl Burkhart, deputy director of One Earth: “Global emissions will peak before 2025 and are expected to rapidly decline thereafter. But even with a steep decline of 5-7% per annum, which is considered the maximum feasible rate of industrial decarbonisation, we will not be able to stay within the IPCC carbon budget to limit global temperature rise to 1.5°C.
Burkhart says that we will need to ramp up nature-based carbon removal services and reach net zero by 2040.
The argument has a number of corporate supporters. Currently, 378 companies from 34 countries have signed up to the “Climate Pledge”, a corporate club co-founded by Amazon in 2019 aimed at achieving net-zero emissions by 2040. The group is pushing signatories to do better on three counts: measuring emissions, investing in reducing them and purchasing offsets that are “real, permanent and socially beneficial”.
As an example – in 2021, BT Group, the UK telecommunications company and a member of the Climate Pledge, brought forward its operational emissions neutrality pledge from 2045 to 2030, with an intention to extend the neutrality to its supply chain by 2040.
The other side of the equation: funding the “net”
A year after co-founding the “net-zero by 2040 club”, Amazon dedicated $2bn in initial funding to what it called the “Climate Pledge Fund” to invest in clean technologies and emission-reduction solutions that move corporations closer to a 2040 due date. The portfolio includes companies working on carbon-negative cement, green hydrogen and batteries.
Yet, investments like the ones in Amazon’s portfolio are just one side of the equation. Getting to net positive means investing large sums of money in the companies and technologies that capture, remove and store greenhouse gases.
Burkhart suggests that if climate positivity and the emissions reductions it requires are to be achieved, investing in carbon dioxide removal (CDR) solutions is essential: “New research shows this goal is technically feasible but would require about $200bn in annual CDR finance by 2040. For reference, this is roughly comparable to the global pet care market.”
How do you increase capital flows into CDR? The answer is complex and very much a work in progress. For instance, one of the approaches suggested by consulting company McKinsey and technology firms Alphabet, Shopify, Meta and Stripe is a demand-side fix to the underlying economics. The group joined hands in April 2022 to implement a $925m commitment to future demand for CDR technologies, an “advanced market commitment”(AMC) in technical terms.
The group adopted the AMC idea from historical examples of funding vaccine development: “AMCs can be effective because they send a strong and immediate demand signal, encouraging further innovation and development of new technologies in the space,” says McKinsey.
CDR involves nascent technologies, risky bets and an urgent need to scale solutions. Investing in it means looking into the investment appeal of companies like Climeworks, a Swiss technology firm pushing the envelope on direct air capture (DAC) and carbon storage. Back in 2017, the company built the world’s first DAC plant of commercial scale in Switzerland. In 2021, the company launched the world’s largest DAC plant in Iceland. In 2022, Time Magazine listed it as one of the 100 most influential companies in the world.
In its 2022 review of carbon capture, utilisation and storage technologies the International Energy Agency documented increasing momentum across the world with new projects being launched in 30 countries, including Australia, Japan, China and Canada. The IEA’s reading of the state of play was that progress was slow but not stagnant.
When it comes to the other side of the climate-positive equation, clearly there is some way to go.
Atharva Deshmukh is Net Zero Investor’s head of research.