Ethical and Sustainable Investing and the Need for Carbon Neutrality

Human-induced carbon emissions play a major role in climate change. Current approaches to limiting global average temperature rises have focused on encouraging companies to report and reduce emissions. However, slow uptake of initiatives by governments, population growth, and desirable economic growth in less developed countries mean that the reduction of carbon emissions is unlikely to prove sufficient to meet aims of limiting global warming to 1.5 °C (or well below 2 °C) above preindustrial levels. Emissions need to be reduced by at least 40% by 2030, and carbon neutrality is required for global warming to stabilize. To achieve this, companies need to move toward net zero carbon emissions, beginning by defining strategies. Internet of things technologies may deliver 15–20% emissions reductions by 2030, mostly via energy and efficiencies, far less than the 40% required. Internet of things technologies can also help climate model data collection and support attribution by monitoring specific country and firm emissions.

Ethical and sustainable investors are familiar with carbon emission reductions as an environmental factor. Additionally, ethical investors need to focus on net zero carbon emissions as a factor in investment selection to stimulate companies to adopt appropriate strategies. They can also support firms developing new internet of things technologies in these areas. Companies need to develop policies supporting the adoption of zero net carbon emissions and related internet of things targets. This development to ethical and sustainable investment will require the involvement of investors, wealth managers, and fund providers. A definition of suitable policies and standards that financial practitioners can implement, communicate, and rely on would support progress in this area.