According to the Science Based Targets initiative (SBTi) net-zero pledges now cover 92% of GDP and 88% of emissions worldwide. However, as SBTi points out, the definition of net-zero and the path to getting there has been interpreted in many different and inconsistent ways.
Honeytree has written in the past about the importance for companies of applying science-based targets to their greenhouse gas emissions reduction initiatives as a way to eliminate greenwashing in net zero claims.
The SBTi, which is a partnership between CDP, the United Nations Global Compact, World Resources Institute (WRI) and the World Wide Fund for Nature (WWF) is the global standard for science based targets. Targets are considered ‘science-based’ if they are in line with what the latest climate science deems necessary to meet the goals of the Paris Agreement – limiting global warming to 1.5°C above pre-industrial levels. For companies overall, this means directly reducing emissions by 90%. The framework does not count offsets and does not count “avoided emissions”. Companies that have committed to science based targets are required to track and publicly report annual company-wide emissions and can then be considered for validation by the SBTi.
For Honeytree, 65% of our Global Equity Strategy comprises companies that have approved science-based targets validated by SBTi. In comparison, for the S&P 500, the figure is 42%. Additionally, another 5% of our Global Equity portfolio is committed and awaiting SBTi approval for its net-zero commitments. The remaining 30% of our companies have either made net-zero commitments or are working toward science-based targets and have developed targets for emissions reductions. The chart below summarizes the Global Equity Strategy’s progress on Science Based Targets in 2023.
All our companies understand that credible emissions reductions improve confidence among stakeholders, can reduce regulatory risk, increase profitability and competitiveness, and help drive innovation internally and throughout the value chain.
Agilent Technologies Inc. is a good example of one of Honeytree’s holdings that is actively employing science-based targets in its GHG reduction strategy. Agilent is a company that supports scientists in 110 countries in cutting-edge life science research, patient diagnostics, and testing required to ensure the safety of water, food and pharmaceuticals. The company aims to achieve net-zero across its value chain by FY2050. As just one of many examples of its innovative programs, the company offers Agilent lab customers the option to trade in their used analytical instruments for cash or toward the purchase of new instruments. Through refurbishing and reselling used analytical instruments the company reduces its energy and materials use.
Cummins has a long term focus on advancing zero-emissions technologies for its clients including electric and hydrogen offerings while also focusing on meaningful reductions in emissions in traditional engine technologies. Beyond products that allow customers to reduce or eliminate their emissions from fossil fuels, Cummins also focuses on emissions reductions in its own operations. Since 2018, Cummins has been focused on reducing its absolute Scope 1 and 2 emissions by 50% from the 2018 baseline. In 2023 they reported a 31% reduction from the baseline. A summary of Cummins progress from 2018-2022 on Scope 1 & 2 emissions towards its 50% absolute reduction target is presented in the following image:
In case we need to be reminded of the growing seriousness of climate change, a new study is proposing a 6th category to the hurricane scale to reflect the intensifying seriousness of tropical cyclones in a global warning environment. The study observes that “…we find that a number of recent storms have already achieved this hypothetical category 6 intensity and based on multiple independent lines of evidence examining the highest simulated and potential peak wind speeds, more such storms are projected as the climate continues to warm.”
While all sectors of society need to continue to contribute to greenhouse gas emissions reductions, some of the most impactful reductions will come from the world's largest companies. These companies are not only driving technological advancements for the benefit of their clients through products and services, they are also reducing emissions across their own operations, often at impressive scale.
At Honeytree we strive to understand the varied interpretations and complexities surrounding net-zero commitments and the progress companies are making on those commitments. Our approach remains focused on science-based targets, ensuring our investments align with meaningful, transparent and ambitious climate action.