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Corporate net-zero climate goals: 2030 game-changers or 2050 greenwash?

The world has about two business cycles to alter investment decisions that will make or break the battle against climate change.
By Justin Guay

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Justin Guay is director for global climate strategy at the Sunrise Project. This contributed content represents the views of the author, not those of Canary Media.

Unless you have been hiding under a rock, you’re probably aware that net-zero climate commitments are the latest pledge du jour. These commitments enact a promise to reduce net carbon emissions to zero by the middle of this century. All told, there are now more than 1,000 companies and 40 investors that have implemented such a pledge.

But can companies driven by quarterly earnings plan and execute an evolution from dinosaur to bird over the next 30 years? Can we all sit back and relax because companies the world over have this thing taken care of? It turns out there’s a lot of reason for skepticism.

Plan for quarterly earnings — or for the next quarter-century?

First and most important is the challenge of executive leadership. For any company not only to set a net-zero climate goal, let alone set into motion the actions necessary to achieve it, C-suite buy-in is an absolute must. The problem is, the average tenure of a CEO of a large-cap S&P 500 corporation stands at seven years and is trending down. For all the bold leadership ascribed to the corporate bigwigs making these commitments, most won’t be around to see them through.

This likelihood of shifting accountability also extends to corporate boards, where the average tenure duration is shrinking as well: It is now eight years and on the decline. Between the turnover of CEOs and board members, it’s likely that every company making a commitment to go net-zero by 2050 will have a full turnover of corporate governance less than a third of the way through their progress toward that commitment. This is not a recipe for long-term success.

Beyond the tenure of CEOs and board members, it’s increasingly likely that the companies themselves will not be around to make good on these commitments, regardless of who is at the helm. A recent analysis put the average age of a company at 20 years and trending down. In fact, only 12 percent of Fortune 500 companies from the 1950s are still operating today.

This shifts the critical question from whether we believe today’s corporate giants genuinely want to make good on these commitments to whether we think they, or their leadership, will even be around at all. Rather than congratulating companies that promise to clean up their act for a tomorrow they may never see, we need to be holding them to account for what they’re doing today.

Money talks

Sadly, what they’re doing today doesn’t seem to be aligned at all with these 2050 pledges. A recent analysis by the largest investor coalition on the planet, Climate Action 100+, found that of the 159 largest companies the group analyzed, none of them had matched their 2050 vision with 2021 action when it came to capital allocation. Money talks, and this lack of change to short-term investment plans speaks volumes about corporate leadership’s commitment to these long-term goals.

Image from Climate Action 100+

That is why it’s particularly important to focus on financial institutions as the linchpin connecting the present to the future. Financing decisions being made today drive the decarbonization impact of the companies, projects and communities of the future. The balance sheets of financial institutions must be a leading, not lagging, indicator of change. This means their net-zero pledges must be targeted decades in advance of the rest of the corporate world because it’s their investment that will drive broader change.

Unfortunately, today many of these financial commitments look the same as other corporate goals — promises to deliver net-zero carbon in three decades while doing little to nothing between now and then to make it happen. Most recently, we’ve seen all six of the big U.S. banks announce 2050 net-zero goals, but most still lack detailed plans to get there. Several, such as Goldman Sachs, lack any 2030 interim goals for their financed emissions. Others, including Citi and Chase, have only released 2030 goals for certain sectors, such as energy and power.

But it’s not just the banks that lack key details for how these commitments will play out over the all-important next decade. Vanguard, the world’s largest investor in coal and the second-largest asset manager on the planet, just announced a 2050 net-zero goal of its own. But like the others, it didn’t publish a plan. Vanguard may take up to a year to publish its 2030 goal, and that goal may end up covering only a portion of its portfolio.

2030, not 2050, is the deadline that matters

Ultimately, we don’t have 30 years to do what needs to be done. We have just two business cycles — each lasting about five to seven years — to make the structural changes to the global economy necessary to meet the decarbonization targets that the U.N.‘s Intergovernmental Panel on Climate Change has found are needed to limit global warming to non-catastrophic levels.

What the climate community must demand of these companies is 2030 targets and 2021 action. That’s a timeline on which they can reasonably be held accountable based on CEO and board tenures. It’s also the relevant timeframe for investment decisions that will lock in future emissions trajectories for years to come. Because what these companies do or don’t do by 2050 won’t matter if we haven’t radically changed course in the next few years. If 2030 goals become the new norm, then, and only then, we can take this trend seriously.

Justin Guay is director for global climate strategy at the Sunrise Project.