PT  - JOURNAL ARTICLE
AU  - Carmine de Franco
AU  - Johann Nicolle
AU  - Lan-Anh Tran
TI  - The Challenge to Meet Net-Zero
AID  - 10.3905/jesg.2022.1.048
DP  - 2022 Aug 31
TA  - The Journal of Impact and ESG Investing
PG  - 71--79
VI  - 3
IP  - 1
4099  - https://pm-research.com/content/3/1/71.short
4100  - https://pm-research.com/content/3/1/71.full
AB  - Most low-carbon strategies imply modifying the composition of portfolios compared to cap-weighted benchmarks. Nonetheless, from an aggregated point of view, since for each sale there is a buyer, only the ownership of the company changes: carbon emissions remain the same. Proponents of these approaches emphasize that when capital flows from high- to low-carbon-emission companies, it impacts the cost of capital and funding conditions for companies divested by investors, thus pushing them to improve their climate credentials to attract climate-conscious investors. While agreeing with this, we also acknowledge that for activities having no direct low-carbon substitutes, individuals cannot easily reduce the carbon impact of their consumption. Hence, higher cost of funding may translate into higher prices for consumers. Therefore, to reduce the global carbon impact, all companies, especially laggards, should contribute. But how much will the stock market reduce its carbon intensity if laggards were able to reduce theirs, for example, at the median level in their peer group or sector?