Editor’s Note: Time to go all in on the zero carbon economy

What gets funded gets done. How we invest our trillions starting right now will determine our future.

Save the planet Illustration by Kyle Metcalf
Illustration by Kyle Metcalf

When Elon Musk was a teenager living in Montreal, he ran an experiment to see if he could survive on a dollar-a-day food budget for a month. If he could live on almost nothing, he thought, he could afford to risk everything. Even if he failed spectacularly, he would always be able to scrounge up $30 to avoid going hungry.

A combination of pasta, hot dogs, oranges and green peppers got him through the month.

Some 30 years later, riding Tesla’s soaring stock, Musk passed Jeff Bezos to become the richest man on the planet, with a net worth of US$189.7 billion as of January 8, 2021.

In carrying out his mission to accelerate the world’s transition to sustainable energy, Musk has become a prophet for clean capitalism, with Tesla now ranked as the most sustainable and valuable car company in the world.

Musk is not alone. The Prince of Wales, the pope, and critically, a protest movement catalyzed by Greta Thunberg have all turned up the heat for businesses to get real about cooling the planet.

Prince Charles has long championed the environment and the central role industry and finance must play in its protection, but he’s dialled up the urgency significantly in the past year. In the fall, he said climate change poses such a severe threat that the world’s only option is to adopt a military-style response reminiscent of the U.S. Marshall Plan that helped rebuild post-war Europe 70 years ago.

In January, the prince looked back more than 800 years to the Magna Carta (which inspired a belief in the fundamental rights of people) to issue a companion document – the Terra Carta, or Earth Charter – that aims to enshrine the rights and value of nature in capitalism, inviting the world’s CEOs to make a sustainable future the growth story of our time.

Pope Francis once described unbridled capitalism as the “dung of the devil.” In a sign of the times, he recently gave his blessing to the Council for Inclusive Capitalism, a partnership between the Vatican and the leaders of some of the world’s largest businesses, including the chiefs of BP and Bank of America.

This seemingly unholy alliance seeks to make capitalism a more holy instrument for answering the cry of the earth and the cry of the poor.

There are now more than 300 companies, representing more than US$3.6 trillion in market cap, that have committed to a net-zero-emission target in line with a 1.5°C future.

Some worry these are empty words that give the impression that sufficient action is being taken – a sort of delay tactic. Thunberg, the teenaged activist who kicked off a citizens’ climate movement, says, “We must forget about net-zero – we need real zero.”

She spells out what that means:

“Immediately halt all investments in fossil fuel exploration and extraction. Immediately end all fossil fuel subsidies. And immediately and completely divest from fossil fuels. We don’t want these things done by 2050, 2030 or even [next year]. We want this done now.”

She’s right, but defunding carbon bombs will not be enough; not even close. The real action is going all in on funding climate solutions. What gets funded gets done. How we invest our trillions starting right now will determine our future.

To paraphrase Indian philosopher Jiddu Krishnamurti, the climate-solution revolution is today, not tomorrow. The litmus test for companies and countries (and anyone, really) is what percentage of your current budget is allocated with an intention to create a carbon-free sustainable world. If it’s less than 100%, you’ve got work to do.

The recently released Corporate Knights Global 100 Most Sustainable Corporations in the World is a list of companies that are, in the words of Prince Charles, who spoke at this year’s launch, “leading the way by putting sustainability at the heart of their products, services, business models and investments, helping to move the world onto a more sustainable trajectory.”

This year’s Global 100 companies rose to the top of a pool of 8,080 global firms that earn more than $1 billion a year, based on rigorous assessment of 24 indicators, including percentage of taxes paid and percentage of revenue and new investments aligned with a sustainable economy. Several new performance indicators reflect social concerns highlighted by both the pandemic and the Black Lives Matter movement, including providing paid sick leave and executive and board racial diversity.

On average, one-third of new investments on the part of Global 100 companies are clean, in contrast to less than one-quarter for their peers, while the percentage of Global 100 companies that offer at least 10 days of paid sick leave (86%) is more than double that of their peer benchmark, the MSCI All Country World Index (41%).

Global 100 companies also earned on average 41% of their revenues from products or services aligned with the UN Sustainable Development Goals, compared to just 8% for their peers.

But none of this would have legs if the good guys weren’t also faring well financially. On this score, the Global 100, which is calculated as an index, handily outperformed its MSCI ACWI peers by 10% over the last year, and 43% since the Global 100 index was launched in 2005.

What is needed now is for the rest of the business world, most importantly the big-money investors who have been sitting on the sidelines, to also lean into this more civilized form of sustainable capitalism.

Encouragingly, the largest pension fund in Ontario, the $205 billion Ontario Teachers’ Pension Plan, recently committed to achieving net-zero greenhouse gas emissions by 2050. This marks a stark contrast to the Canada Pension Plan, which has no such target and has been singled out for its “troubling incrementalism” by Osgoode Hall pension scholars – while forgoing $6 billion in returns as a result of its fossil fuel investments over the past 10 years, according to Corporate Knights analysis of its equities portfolio.

But now that BlackRock, the largest investor in the world, with a whopping $8.7 trillion under management, has jumped on the net-zero-emissions bandwagon, it is only a matter of time before it becomes the standard, placing a 100% sustainable and zero-carbon economy within our grasp.

The good news for our species is that the forces of pride and profit have shifted in favour of those on the right side of climate history, with shame and economic shambles awaiting those who cling to the wrong side.

Just four of the 13 Canadian companies on the Global 100 have committed to align their businesses with net-zero science-based targets, compared to more than half of Global 100 companies in general, though there is still time for them to get on board in the lead-up to global climate talks this fall in Glasgow.

With the sun shining on climate solutions, companies are free at last to shed their carbon cloaks.

A version of this article appears in the Winter Issue of Corporate Knights as well as the Toronto Star.

Toby Heaps is the CEO and editor-in-chief of Corporate Knights.


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