Earth Day 2021, Net Zero, and the Energy Transition

The theme of Earth Day 2021 is Restore Our EarthTM. According to the event organizers, this theme “focuses on natural processes, emerging green technologies, and innovative thinking that can restore the world’s ecosystems” and “rejects the notion that mitigation or adaptation are the only ways to address climate change.” As a company that devises solutions for investment professionals who are concerned about climate change and are interested in the energy transition, we take this theme to heart.

On the topic of restoring the earth, lately we’ve been focused on studying the various commitments to net zero, i.e., to ensuring that there is a balance between the amount of carbon that is emitted into the atmosphere and the amount that is removed, absorbed, or eliminated. According to the United Nations Framework Convention on Climate Change (UNFCCC), these commitments doubled in less than a year as of September 2020, and included 22 regions, 452 cities, 1,101 businesses, 549 universities, and 45 major investors, many of them setting a target date for reaching net zero of 2050 or sooner. And a recent Forbes piece by Ceres CEO and President, Mindy Lubber, shows substantial progress since last fall, indicating that the world’s largest financial institutions, including BlackRock, Vanguard, and State Street Global Advisors, had all committed to net zero. According to Ms. Lubber, “87 asset managers with $37 trillion in assets have committed to the net-zero goal and set interim 2030 targets through the Net Zero Asset Managers initiative.”

All of these commitments are significant, but, as Lubber asks: “Now what?” Indeed, one can’t help but wonder whether they will result in action plans that put us on a definitive path to net zero, in part because that path is not yet fully mapped out, much less forged.

While we do still have a long way to go in our journey towards decarbonization, we do know one thing: we cannot let the perfect get in the way of the good.  All viable technological breakthroughs, financial strategies, governmental policies, public efforts, etc., need to be considered, supported, and implemented; this is truly a moment to adopt an “all-of-the-above” strategy for the energy transition. The risks could not be more apparent, and the stakes could not be higher. But the pay-off could also be substantial, not just in financial terms, but also in our ability to, as this year’s Earth Day theme reminds us, “restore the earth”.