FTSE 350 firms up spending on ‘carbon offsets’ in race to net zero
The UK’s top listed companies are increasingly using carbon offsets to achieve their net zero goals, new research shows.
The vast majority (96 per cent) of Britain’s FTSE 350 companies have already upped expenditure on carbon credits over the past 24 months, while almost half (47 per cent) intend to increase spending dramatically over the next two years, according to research from carbon market startup Kana Earth.
A further 42 per cent of FTSE 350 firms are planning to further increase spending on carbon offsets and carbon credits slightly over the next 24 months, while just 11 per cent expect to keep expenditure the same.
The FTSE 350’s investments in carbon offsets comes as the UK’s top companies seek to cut their greenhouse gas emissions in line with Britain’s push to become a carbon neutral economy by 2050.
The phrase carbon offset covers a variety of schemes through which businesses are able to invest in to compensate for their own emissions, including renewable energy developments, energy efficiency projects, or forest-growing initiatives.
At COP26 in Glasgow in November 2021, then chancellor Rishi Sunak set out plans to require that all UK listed companies, from 2023 onwards, to publish detailed plans outlining the steps they will take to align their businesses with the UK’s green ambitions.
The new requirement, which applies to listed companies and private firms with more than 500 employs and £500m in annual turnovers, will be overseen by the UK’s Financial Conduct Authority (FCA).
Speaking at the climate summit, Sunak said the new requirements are aimed at ensuring the UK becomes the “first-ever net zero aligned global financial centre”.
The FTSE 350’s investments, however, come amid criticism of carbon offsets as a means of achieving climate goals.
Critics argue carbon offsets act as a license to pollute in letting firms pay others to reduce their environment impacts, instead of cutting their own emissions.
Critics also claim the market for voluntary carbon offset investments is fragmented and overly complex, arguing the quality of offsets varies significantly between different providers of such schemes.
Notably, there is currently no overarching market for carbon offsets, but instead an array of providers offering various opportunities to invest in carbon offsetting schemes.
In a 2021 report by McKinsey, the consultancy warned the carbon offset market suffers from a lack of universal standards and an absence of any governing bodies.
Kana Earth founder Andy Creak said: “It is vital the UK market, which is currently fragmented and lacks scale, is made more efficient and centralized… [particularly] with so many companies relying on carbon offsetting to meet their net zero emissions targets.”
The research showed more than one-third of FTSE 350 companies already say their operations are carbon neutral, while 60 per cent say they are well advanced in their efforts to achieve their own net zero goals.