Written by Joe Holman with contributions by Daniel G. Viola (Partner)
Why it is Important.
If US investment managers create carbon-neutral offices, collectively, they would sequester the carbon equivalent of over a million acres of US forests per year. It does not sound possible, but if you factor in the power of multiplication, it makes sense.
There are 10,000+ registered investment advisers in the USA that consume energy, travel for business, and commute to work. Total emissions of a typical NYC office generate 75 metric tons of CO2e. If you assume this represents the average office; then if every manager went carbon-neutral, collectively, they would annually remove 750,000 metric tons of CO2e from the atmosphere. According to the EPA, this is the equivalent of removing 162 thousand cars from the road or preserving a million acres of US forests per year[i]. No small achievement for what seems like such an inconsequential act. Especially seeing the cost of going carbon-neutral is the same as a fancy dinner.
Creating a carbon-neutral office
To create a carbon-neutral office, managers need to do these four items.
Define the boundary – What activities do you include in the calculation? Utilities, commuting, business travel, or something even more inclusive like data centers.
Take your carbon inventory – Your carbon inventory is the carbon emissions within the defined boundary. Think of it as your carbon footprint.
Establish a carbon reduction plan – Identify and implement cost-effective opportunities to reduce energy consumption and carbon emissions. Focus on quick wins such as LED lighting, HVAC optimization, and telecommuting policies, which quickly pay for themselves in energy savings.
Buy carbon credits – Buy enough carbon credits to bring office emissions to net-zero.
Deciding on a boundary is a personal choice. Firms that go carbon neutral can initially start with emissions generated by their office (Scope 1& 2 emissions) before expanding the scope to business travel, commuting, and beyond (scope 3). The primary sources of (scope 1 & 2) office emissions are from utility usages, such as electric, gas, and steam.
A company’s carbon inventory is calculated using various models incorporating assumptions and factors that estimate annual carbon emissions. Typical inputs for an office’s emissions are energy usage data and standard emissions factors. In the absence of energy data, estimates are made using the office’s square footage and energy intensity factors. Emissions from employee commuting habits can be estimated using weekly miles traveled and transportation mode used. More information on calculating your carbon inventory can be found on the EPA, Energy Star, US Energy Information Administration, and the greenhouse protocol websites.
After quantifying your emissions by source, an emission reduction strategy can be implemented. Common techniques include switching office electricity to a renewable energy source, using energy-efficient lighting with motion sensors, reducing unnecessary business travel, and allowing remote work. No one strategy works best for everyone, but all of them will reduce the cost of buying carbon offsets and may also reduce your overall energy costs.
Carbon credits are generated by projects that either remove carbon from the atmosphere or otherwise avoid emissions, thus creating a carbon deficiency. Examples of actives that create a carbon deficiency include planting trees, sustainable farming, and renewable energy projects. Verified credits are then sold on an exchange or by carbon brokers. There are numerous firms of every size selling credits as a broker or exchange.
An excellent example of a US-centric firm that sells carbon credits is Nori LLC. They buy carbon credits from US farmers who implement sustainable farming practices that remove carbon from the atmosphere and store them in their soil. Credits are purchased at $15 per ton and sold at cost plus a 15% commission. The US farmer gets paid 15$ per ton of carbon equivalent for practicing sustainable farming, and the companies buying the credits are supporting a specific US farmer. Wallstreet supporting US farmers could not make for a better narrative.
Conclusion
A carbon-neutral office shows the world you care about global warming. Investment managers can make a significant difference by going carbon neutral, with minimal cost and effort. Investors appreciate the effort, your community enjoys clean air, and your children will thank you for a better future. [i]www.epa.gov/energy/greenhouse-gas-equivalencies-calculator
About Joe Holman:
Joe Holman founded ESG Administration and has over 25 years of experience in the financial services arena. His unique understanding of the investment community allows him to help managers implement ESG without disrupting their investment process. Mr. Holman is a New York CPA and a Sustainability Accounting Standards Board (SASB) credential holder. He earned his MBA from Rutgers, the State University of New Jersey, and is currently studying for an M.S. in Sustainability Management at Columbia University. If you would like to contact Mr. Holman, he could be reached at joe.holman@esgadmin.com.
About Daniel G. Viola:
Daniel G. Viola is a Partner of Sadis & Goldberg LLP and is the Head of the Regulatory and Compliance Group. He structures and organizes broker-dealers, investment advisers, funds and regularly counsels investment professionals in connection with regulatory and corporate matters. Mr. Viola served as a Senior Compliance Examiner for the Northeast Regional Office of the SEC, where he worked from 1992 through 1996. During his tenure at the SEC, Mr. Viola worked on several compliance inspection projects and enforcement actions involving examinations of registered investment advisers, ensuring compliance with federal and state securities laws. Mr. Viola’s examination experience includes financial statement, performance advertising, and disclosure document reviews, as well as, analysis of investment adviser and hedge fund issues arising under ERISA and blue-sky laws. Mr. Viola has been active in the Blockchain and Virtual Currency verticals since 2014. Mr. Viola also received the “Super Lawyer” designation in June 2020. For more about Mr. Viola, or to contact him, click here.
