Finding New Ways to Reduce Our Carbon Footprint
Reducing our corporate carbon footprint, both locally and globally, is something that we should all be concerned about. We believe the financial services industry has a unique opportunity to take a leading role in affecting climate change. Just this year, State Street sent a letter to the boards of corporations that we invest in, asking for more transparency in how they’re approaching climate change and other social issues. Further, we are committing to science-based targets for reducing our own carbon footprint as that has become the new global standard. Our goal is a 30% reduction in carbon emissions by 2025, and that number is based our square footage, and not just per person.
No two organizations approach the problem of carbon emissions the same way, but almost any attempt to reduce our carbon output is a worthwhile endeavor. Here are just a few of the programs out there right now that State Street supports.
Generating Carbon Credits
Carbon credits have created a market for reducing GHG emissions by quantifying the cost of polluting the air. The standard measure? One carbon credit equals the removal of 1 ton of CO2 from the environment. That value is critical because it allows ESG efforts like carbon credits to be measured with a fiscal value in mind, not just a moral value. According to our March 2017 ESG research; while stakeholders care about a wide variety of ESG issues, not all of those issues are critical for value creation. In terms of carbon credits, companies not using their full allocation of GHG emissions based on global targets can "sell" their credits. Firms that don’t have the appetite or ability to change their operations and are over their GHG emissions limit can buy them. Just like a scale, the excess GHG emissions of one company are offset by the carbon credit surplus of another, balancing out the overall emissions level. Much like securities, carbon credits can be traded in international financial markets. We are proud to say that 100% of State Street’s carbon emissions from global business travel are offset by the purchase of carbon credits.
Black carbon emissions1, so called because of their color, are the result of the incomplete combustion of fossil fuels, biofuels and biomass (burning wood, for example). They can be caused by natural occurrences such as forest fires, but also by human activities such as inefficient cooking methods in developing countries. Unlike CO2, black carbon remains in the atmosphere for only a few weeks and its climate impact is regional, so cutting black carbon emissions would almost immediately reduce the rate of warming in a country like Uganda, where the production of charcoal and collection of fuelwood for cooking is also tied to the depletion of the country’s forests.
The Cookstove Project replaces inefficient open fires, the traditional cooking method in rural villages around the world, with clean, efficient and affordable stoves, thereby burning the fuel more completely and reducing the amount of black carbon produced. Using locally sourced materials, the cookstoves contain and direct the fire to produce cleaner, hotter energy with much less smoke. The higher heat achieved burns off the toxic gases and uses far less fuel than traditional three-stone cooking practices. The stove's airtight cooking chambers and built-in chimney ensure that any remaining fumes are not released into the home. This helps protect Uganda's forests, further combating climate change. In addition to the climate impact, clean cookstoves help to prevent and control chronic and acute health effects- such as child pneumonia, lung cancer, chronic obstructive lung disease and heart disease- by improving air quality in the home.
As the US Department of Energy explains2, wind turbines operate on a simple principle. The energy in the wind turns two or three propeller-like blades around a rotor. The rotor is connected to the main shaft, which spins a generator to create electricity. That electricity can be sent back to the power grid. In 2015, we purchased Environmental Attributes from three wind farms in Poland, all of which are in close proximity to the new State Street office in Gdansk we opened in the same year. State Street's commitment to the Polish wind project supports the displacement of fossil fuel-based power in the country. Fossil fuel power plants are the standard in Poland, providing the overwhelming majority of the electric load. These wind farms displace a percentage of that fossil power.
We are also invested in US based wind farms in Oklahoma, Massachusetts and South Dakota. The Massachusetts wind project directly supports an in-state, small-scale wind project and the South Dakota project is a first-of-its-kind community wind investment partnership. We believe strongly in being a global force, local citizen.
Corporations can take many steps to reduce their own daily carbon footprint, and State Street is hoping the financial services industry can lead the way. That’s why we are invested in projects like Cookstove, multiple US wind projects, using renewable energy to power our North American electric load, using carbon credits to offset business travel and more. We have the access and the ability to support programs that impact carbon emissions all over the world, and it’s a role we must take very seriously to ensure an environmentally sound future.
1. What is Black Carbon? (2010, April). Retrieved from https://www.c2es.org/publications/black-carbon-climate-change
2. How Do Wind Turbines Work? (n.d.). Retrieved April 19, 2017, from https://energy.gov/eere/wind/how-do-wind-turbines-work
Mark McDivitt is the Head of ESG Solutions at State Street Global Exchange and a member of the Executive Corporate Responsibility Committee at State Street Corporation.