The world’s cash has a carbon problem
When we think about corporate carbon emissions, we probably envision a factory, a polluted river or maybe even waste in a landfill. So it may be a surprise to learn that the world’s largest companies cash and investments generate significantly more emissions than their operations and supply chains combined. When a company holds cash (A LOT of cash in the case of the world’s largest companies) banks invest that money in energy development, construction projects, loans to other businesses and a multitude of other activities that all generate emissions. These scope 3 emissions have a BIG impact. The Carbon Bankroll Report notes that Apple’s $191M in cash and investments in 2021 generated 14.9M tonnes of emissions — nearly three times larger than the total emissions generated by the use of every Apple product in the world in the same year!
And, it’s not just confined to the cash and investments of large corporations. Pension funds represent ~$47T in capital, of which only 15% have a policy to exclude fossil fuels in some way and 65% have no climate policy of any kind (according to the BBC).
The good(ish) news is that the corporate sustainability movement is gaining momentum. All the companies listed above have made commitments to both net-zero and pathways to 1.5 degrees. Many have also created investment arms focused on climate solutions, like Microsoft’s $1B Climate Innovation Fund for carbon reduction and removal technologies.
Yet, the financial supply chain — despite even the most ambitious climate commitments — is funnelling billions to the industries driving the climate emergency. Since the 2015 Paris Agreement, the world’s 60 largest commercial and investment banks have invested $4.6T in the fossil fuel industry. Companies of all sizes, pension funds and their collective shareholders have a powerful role to play in pushing the financial sector to rapidly decarbonize. The universal language of cash, even passive cash reserves, may be one of the most important ways to mitigate climate disaster.
