Carbon Handprint: It's What Firms Don't Do That Counts

As global warming worries approach critical mass, corporate bond investors expect issuers to be part of the solution. At the epicenter of the climate crisis are greenhouse gases (GHG), which all industries emit in one way or another. Most companies strive to shrink their emissions, or carbon footprint, but others take an additional step to avoid them altogether and improve their carbon handprint.

Carbon Handprint Measures Positive Climate Contribution

The planet has nine years to improve carbon emissions trajectories and avoid catastrophe, according to a study released at the recent UN COP27 climate conference. Global warming experts at COP27 said that reducing carbon output alone is now insufficient to hit long-term net zero* goals. More and novel approaches are critically needed, especially prevention.

To understand how carbon emissions prevention and avoidance works in industries, investors should look to carbon handprint. While carbon footprint measures GHGs produced from a company’s activities across its operations and third parties, carbon handprint sums up emissions that never reach the atmosphere.

Carbon handprint considers new or improved facilities and processes that directly prevent, restrict or avoid additional carbon output, whether by the firm, its customers or anything else in its orbit. In contrast to carbon footprint, the bigger the handprint, the better the positive impact. Going forward, more companies will endeavor to shrink their footprint and grow their handprint.

Carbon handprint adds a new dimension to climate-aware fixed-income investing. It’s another yardstick of an issuer’s positive contribution to a better environment. It also strengthens the framework around standards that managers use to score certain ESG-labeled issues, especially green bonds. And with a more accurate picture of a green bond’s potential, managers can weigh the worth of its greenium, the negative yield between a company’s green and conventional issues.