The Corporate Climate Pledge Problem and KGHG’s Solution |

More companies are committing to a climate pledge but Brad Smith, president of Microsoft, believes that most don’t have the capability or capacity currently to meet those pledges, reported CNBC.

Microsoft estimates that there are currently 3,470 companies globally that have created some sort of climate plan that focuses on reducing emissions to meet 2050 net-zero goals.

“That shows that an awareness and good intentions have literally spread around the world. Now, what’s bad: there does not yet exist the capacity for most — for almost any company — to, with confidence, turn that pledge into the progress that has been promised,” Smith said at the Breakthrough Energy Summit last week. Breakthrough Energy is a company centered on climate innovation and was launched by Bill Gates.

Smith attributes the challenges that companies face primarily to the nascence of the emissions tracking industries and the lack of standardization on emissions and how they are defined. Even companies that are familiar with scoped emissions all the way through their supply chains have an extremely difficult time tracking those emissions, much less doing so efficiently.

The lack of a clear regulatory standard means that companies collect different data sets using a wide variety of different measurements, report different types of data, and track their changes (called carbon accounting) in different ways. Beyond that, Smith explained that there simply aren’t enough workers within carbon accounting to drive improvements to the nascent subindustry. Eventually, efficient tools will be developed to track emissions, but the current uncertainty leaves many companies reticent to make a formal climate pledge.

“What I’m starting to see now among our clients is a reticence about making commitments, rallying the troops to do something, because they’re worried about getting sued because they can’t measure it appropriately,” Greg Guyett, co-CEO of global banking and markets at HSBC told CNBC. “I think we’re starting to see a pullback from making these kinds of commitments.”

KGHG Tracks Companies Actively Making the Carbon Transition

The KraneShares Global Carbon Transformation ETF (KGHG) seeks to capture the true potential within the carbon transition by focusing on companies from within industries that are traditionally some of the highest emission offenders but that are on the precipice of transitioning to renewable technologies. It goes beyond relying on just a climate pledge and offers exposure to companies making a meaningful transition to renewable energies and away from heavy carbon-emitting practices.

KraneShares believes that the upside potential of investing in these companies as they transition is enormous. These companies that are set to disrupt their industries would benefit greatly from being leaders in the transition, as the cost of carbon emissions will only become more expensive, cutting into the bottom line as demand decreases for high emissions offenders.

KGHG is an actively managed fund that invests globally across market caps and sectors in carbon emissions reducers that are taking active steps to reduce their carbon footprints and services or the carbon footprints of other companies. This also includes companies within the supply chain of the carbon-reducing companies and companies that are growing their businesses with companies that are materially reducing carbon emissions.

The fund utilizes proprietary, fundamental, bottom-up analysis using information disclosed by companies and third-party data.

KGHG carries an expense ratio of 0.89%.

For more news, information, and strategy, visit the Climate Insights Channel.