While energy production is, of course, essential to our modern, “always on” society, most primary sources (such as coal and oil) are simply unsustainable in the long term. The fuels that we’ve traditionally relied upon are associated with a plethora of environmental impacts, including climate change, pollution and deforestation. As part of a diversified energy infrastructure, renewable energy has the potential to meet consumer demand with a much smaller environmental footprint, while simultaneously helping to address other pressing problems, such as energy security.
However, expediting the transition toward renewable energy will require the engagement of—and significant investment from—large multinational corporations. To that end, and in support of Climate Week, we took a look at how companies in the S&P 500 are prioritizing adoption of alternative energy and “clean” technologies such as green buildings, sustainable water infrastructure, and pollution prevention. Here’s what an analysis of our data shows:
Beyond the obvious risk to the environment, energy companies simply cannot afford to ignore the transition toward renewable sources, which stands to significantly disrupt their business models and threaten future revenues. Energy companies that don’t diversify their offering through the incorporation of renewable sources are failing to future-proof their businesses, and may find themselves disproportionately exposed to longer-term transition risks associated with carbon regulations and diminished demand for fossil fuels. This means that oil, gas and coal companies could find themselves with stranded assets, i.e., resources and equipment that no longer generate revenue, on their hands. In fact, one study estimated that stranded fossil fuel assets could wipe between $1-4 trillion from the global economy by 2035.
Major energy companies are coming under increased pressure from activist shareholders to commit to reduce greenhouse gas emissions—a trend that shows no signs of slowing, as the latest proxy season resolutions attest. Institutional investors, recognizing their formidable role in accelerating the shift toward a greener economy and the financial risks associated with inaction, are applying pressure to expedite change. Most recently, this was evidenced by the announcement of a UN-backed resolution by international banks—which collectively represent some $47 trillion in global assets—that would see lenders move their portfolios away from carbon-intensive assets.
In short, the case for corporations to embrace clean energy transcends the obvious need to preserve our planet—increasingly, it’s good business sense.
Jay Lipman, a co-founder of Ethic, is driven by the need to address climate and environmental risks with the resources to which we each have unique access. He has been ranked among the Forbes 30 Under 30: Social Entrepreneurs. Born in the UK, he now lives in San Francisco. Previously, he managed the capital of ultra-high-net-worth investors in Deutsche Bank's cross-asset capital markets structuring and sales team.
Travis Korte is the Data Science Lead at Ethic. Previously, Travis organized civic-minded technologists at Hack for LA and advised a wide range of clients on data science, data policy, and quantitative methods. You can follow him on Twitter at @traviskorte.