The Handbook of Corporate Financial Risk Management (2nd Edition)
First published:
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Offsetting Carbon Emissions
Offsetting Carbon Emissions
Foreword
Introduction
Theory and Practice of Corporate Risk Management
Theory and Practice of Optimal Capital Structure
Introduction to Funding and Capital Structure
How to Obtain a Credit Rating
Refinancing Risk and Optimal Debt Maturity
Optimal Cash Position
Optimal Leverage
Introduction to Interest Rate and Inflation Risks
How to Develop an Interest Rate Risk Management Policy
How to Improve Your Fixed-Floating Mix and Duration
Interest Rates: The Most Efficient Hedging Product
Do You Need Inflation-linked Debt?
Prehedging Interest Rate Risk
Pension Fund Asset and Liability Management
Introduction to Currency Risk
How to Develop Currency Risk Management Policy
Translation or Transaction: Netting Currency Risks
Early Warning Signals
How to Hedge High Carry Currencies
Currency Risk on Covenants
Optimal Currency Composition of Debt 1: Protect Book Value
Optimal Currency Composition of Debt 2: Protect Leverage
Cyclicality of Currencies and Use of Options to Manage Credit Utilisation
Managing the Depegging Risk
Currency Risk in Luxury Goods
Introduction to Credit Risk
Counterparty Risk Methodology
Counterparty Risk Protection
Optimal Deposit Composition
Prehedging Credit Risk
xVA Optimisation
Introduction to M&A-related Risks
Risk Management for M&A
Deal-contingent Hedging
Introduction to Commodity Risk
Managing Commodity-linked Revenues and Currency Risk
Managing Commodity-linked Costs and Currency Risk
Commodity Input and Resulting Currency Risk
Offsetting Carbon Emissions
Introduction to Equity Risk
Hedging Dilution Risk
Hedging Deferred Compensation
Stake-building
The focus of this chapter is carbon emissions and the steps that companies can take to reduce their carbon footprint. Climate change caused by greenhouse gas (GHG) emissions is a critical environmental topic, and as such it is increasingly becoming central to the corporate social responsibility (CSR) goals of many companies.
The issue of reducing carbon emissions is becoming more urgent, as shown by the conclusions of a major UN report11 Source: Special Report on Global Warming of 1.5°C (SR15) of Intergovernmental Panel on Climate Change (IPCC) (see https://www.ipcc.ch/). released in October 2018. This report highlighted a number of climate change impacts that could be avoided by limiting global warming to 1.5°C compared to 2°C. For instance, by 2100, the global sea level rise would be 10cm lower with that level, and coral reefs would decline by 70–90% at 1.5°C rather than the 99% expected with a 2°C rise. To limit the global warming to 1.5°C requires “rapid and far-reaching changes in the way we deal with our environment”. Global net human-caused emissions of CO2 would need to fall by about 45% from 2010 levels by 2030, reaching “net zero” around 2050.
BACKGROUND
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