At COP26, British public authorities made it clear that by 2023 they would require UK listed companies to disclose their plans of action to achieve net zero emissions. I think it won’t be long before other public authorities from other parts of the planet will do the same. I think investors are also expected to follow this movement and start rewarding companies that show a high level of willingness to achieve the net zero emissions target.
If this is the case, the basis for competition between companies will have changed and there will be a prize for anyone who proves to have a solid business plan. So business leaders have everything to gain from going from words to deeds. I think they should act ASAP because it takes time to develop credible business plans. A good starting point would be to invest in energy efficiency. I believe investing in energy efficiency always generates value.
In the short-term at least, it is natural that the increase in the supply of materials with a lower emission density – such as green steel, for example – cannot keep pace with the increase in demand. In such a scenario, there may be a shortage of materials with low emission intensity and pressure on prices. I am of the opinion that the leaders of companies whose production lines depend on these materials should act immediately to try to mitigate the effects of shortages in materials and ultimately increase production costs. One way to do this could be to close purchase contracts goods As soon as possible. For leaders in steel or cement manufacturers, a significant increase in demand for zero-emissions goods not matched by an equivalent increase in supply can present a significant business opportunity. This opportunity can only be seized if these manufacturers remove carbon from their asset base.
For all this to happen, money is needed. At present, the capital needed to move to net zero emissions is being raised. To prove that this really is so, GFANZ, a coalition of financial institutions committed to accelerating decarbonization of the economy, includes more than 450 institutions that together represent $130 million in financial assets – 40% of the global total.
The challenge that remains to be overcome today is getting the capital in the right place at the right time. For this to be true, from a systemic perspective, it is necessary to work to expand the markets and financial institutions that can direct resources towards decarbonizing the economy. From a corporate perspective, it will be inevitable to take money to companies that want to decarbonize their activities and seize business opportunities in the fast-growing zero-emissions goods and services markets.
