In early 2020, Jeff Bezos created the Earth Fund through which he pledged to spend $10 billion by 2030 toward fighting climate change[1]. Three years into that pledge, the Earth Fund has committed 17% of its goal, or roughly $1.66 billion[1]. Most recently, the Fund announced its commitment of $34.5 million toward climate reporting and sustainable food[1]. $19.1 million of the total amount will be split roughly in half among two international organizations dedicated to climate reporting[1].
One of the recipients of this round of Earth Fund grants is the Carbon Disclosure Project[2], which determines environmental impact ratings from A to F with scores. The other organization receiving these funds is the GHG Protocol[3], which sets international standards for measuring GHG emissions. Last year, nearly 19,000 companies representing half of global market capitalization disclosed their environmental impact ratings through CDP[4]. Of the Fortune 500 companies reporting through CDP, nearly all of them use GHG Protocol to conduct their reporting[5].
The goal of Earth Fund’s grants to these companies is to help them improve their models and increase data transparency. Because of the significance both companies have to international climate reporting standards, the Earth Fund’s focus on climate reporting will benefit investors whether or not they have skin in the environmental investing game.
Above all, an efficient and healthy market relies on well-informed decision-making. The Earth Fund’s commitment to improving the transparency and methodology of climate reporting gives investors access to more comprehensive, accurate, and consistent information with which they can make better-informed investment decisions. Similarly, greater transparency makes greenwashing much more difficult.
Robust climate reporting also enhances a company’s ability to meet the growing demands of their investors and customers. It improves a company’s international reputation and helps them track progress toward climate over time. With demand for climate reporting skyrocketing, according to the president and CEO of Earth Fund[1], enhanced climate reporting will likely tilt the market toward the companies on the higher end of the climate mitigation and adaptation scale, which will in turn nudge other companies to improve their sustainability efforts. Better reporting, therefore, has the outcome of raising climate standards on a global scale.
One of the most significant benefits of Earth Fund focusing on climate reporting is what it means for risk. According to a 2019 report, 93% of institutional investors believed climate risk had yet to be consistently factored into pricing in financial markets[6]. Then last year, the SEC passed a regulation[7] requiring publicly traded companies to include climate risk in their reports of total investment risk. However, several studies have found that the few companies who reported climate risk in the past did so insufficiently and unevenly[8].
The climate reporting process reveals areas of a business that may be more vulnerable to certain consequences of climate change. This information therefore gives investors a fuller picture of the health and resilience of a potential investment. With Earth Fund’s recent focus on climate reporting, an investor will be better equipped to factor climate risk in their decision-making.
- https://www.forbes.com/sites/phoebeliu/2023/03/21/jeff-bezos-earth-fund-announces-35-million-in-new-grants-to-climate-reporting-and-sustainable-agriculture/?sh=24db6c6a54fc
- https://www.cdp.net/en/
- https://ghgprotocol.org/
- https://www.cdp.net/en/companies/companies-scores
- https://ghgprotocol.org/countries-and-cities
- https://www.bloomberg.com/press-releases/2019-09-16/climate-change-and-artificial-intelligence-seen-as-risks-to-investment-asset-allocation-finds-new-report-by-bny-mellon-investm
- https://www.sec.gov/news/press-release/2022-46
- https://www.brookings.edu/articles/climate-change-creates-financial-risks-investors-need-to-know-what-those-are/
