Transition Finance

Tackling the difficult questions

About 5 years ago, when I started researching on this topic, I was confronted with a dilemma. Carbon intensive industries make, and deliver the products and services we use in our day to day life. Examples are cement, steel, chemicals, electricity (from fossil fuel), food, heating, transportation, etc. These are the very same companies that provide stable returns on your equity holdings, or mutual funds. Yet, these are the very same sectors that are most difficult to transition to Net Zero.

Which sectors produce the most amount of GHGs?

While green finance, and ESG investments target the popular stocks which are no way connected to these essential sectors, my dilemma was getting even more severe, when I found out that the investors in these carbon-intensive companies, have Net Zero targets in place. But how would they meet their Net Zero targets? Are they going to ditch these essential stocks, and invest in fancy ESG rated stocks which have no bearing on our day to day lives?

Photo by Martin Grincevschi on Unsplash