Mark my words…
This will be—without a doubt—one of the biggest global trends over the next 30 years.
- Global investment in this trend totaled $500 billion in 2020…
- As of 2021, the addressable market for one part of this trend could reach $3.5 trillion per year…
- Hundreds of the world’s largest money managers, controlling a combined $61.3 trillion, are focused on this trend above all others…
And it’s growing fast.
I’m not talking about artificial intelligence, 5G, or any other well-known tech trend.
I’m talking about something much more basic…
More specifically, the trend of moving away from CO2-emitting energy sources.
Today, I’ll show you why this is set to be a defining trend of the next few decades.
Like it or not, removing carbon from our atmosphere is a massive global trend. And the world is racing to a “net zero” future.
Net zero refers to the balance between the amount of carbon dioxide and other greenhouse gases produced, and the amount removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away.
The net zero race is taking place for two reasons:
One, people are demanding it. And two, governments are requiring it.
Consider the Net Zero Asset Managers Initiative. It’s an international group of money managers focused on investments that align with net zero greenhouse gas emissions by 2050 or sooner.
In one year since its launch, 273 asset management companies, controlling a combined $61.3 trillion in assets, signed up. To put that in context, $61.3 trillion is equal to 43% of the entire world’s annual GDP.
That means companies that don’t initiate decarbonization plans can say goodbye to investments from large asset managers like BlackRock and Vanguard.
On the consumer side, a growing number of people are willing to pay higher prices for carbon-neutral products and services. Folks are also willing to boycott products and companies they think aren’t doing enough to combat climate change.
Then there’s the regulation side...
Many countries have introduced legislation that requires companies to disclose climate risk. And the leaders of the G7 (US, UK, Canada, France, Germany, Italy, and Japan) all recently agreed “mandatory climate-related financial disclosures” should be started.
Once those disclosures are made, companies that don’t make every effort to cut emissions will suffer damaged reputations, boycotts, and a higher cost to borrow money.
As of May, there are eight jurisdictions currently mandating the disclosure of climate risk. They are Brazil, the European Union, the United Kingdom, Japan, Hong Kong, New Zealand, Singapore, and Switzerland.
Long story short, companies in all sectors are being pressured to cut emissions.
And it’s working.
Big household names like Apple, Amazon, and Microsoft have made net zero commitments. At least one-fifth of the 2,000 largest companies in the world have net zero commitments. Even ExxonMobil pledges to go net zero by 2050.
To get there, these companies first need to calculate their carbon footprints. Then they need to make changes to their businesses to reduce that footprint.
Investing in technologies that remove carbon dioxide from the atmosphere and prevent it from being emitted in the first place will be a big part of this effort.
Scrubbers and filters on smokestacks that prevent greenhouse gases from reaching the atmosphere are a start. But they can’t address the CO2 that’s already in the air.
That’s why many folks think Direct Air Capture (DAC) technology is the future.
DAC removes carbon dioxide directly from the air with an engineered mechanical system.
The system pulls in the surrounding air. Then through a series of chemical reactions, it extracts the CO2 and returns the rest of the air to the environment.
It works just like a mechanical forest. Inhaling carbon dioxide and exhaling oxygen.
But DAC does it much faster and with a smaller footprint. And it delivers the carbon dioxide in a compressed form for storage or reuse.
There are currently 19 DAC facilities operating worldwide. Nearly all of them are in Canada, Europe, and the US.
The problem is DAC is very expensive. Costs are sure to drop as investment in research and development grows. But that will take time.
And the reality is it’s impossible for most companies to get to net zero simply by operating more efficiently and employing new technologies.
But there is a solution that can help now…
I’m talking about carbon credits.
A carbon credit is a certificate representing one metric ton of carbon dioxide (or carbon dioxide equivalent) that has been either prevented from being emitted into the atmosphere or directly removed from the atmosphere.
Companies can earn these credits in many ways—like switching to renewable fuels, planting trees, and protecting rainforests.
It’s important to understand that a carbon credit has monetary value. And it can be traded just like a commodity or stock.
So, companies can buy carbon credits to offset emissions they can’t eliminate. This helps some of them avoid penalties or fines. And it helps all companies that use them appease shareholders and consumers.
Take JetBlue, for example…
The company says it became “the first major airline to achieve carbon neutrality on all domestic flying” in 2020.
JetBlue accomplished this by buying carbon credits.
There’s a market for this. It’s called the voluntary carbon credit market.
It’s where companies choose to voluntarily offset their carbon footprints by buying carbon credits. This market is going to be worth hundreds of billions of dollars a year soon. And it’s going to reward early investors handsomely.
In my Project 5X microcap advisory, I recently recommended the world’s #1 carbon “financier.” In short, it provides funding for carbon credit-producing projects—like forest conservation, renewable energy projects, and carbon capture—in exchange for a stream of the carbon credits produced by these projects each year.
It has a “first mover” advantage in a market that’s going to be huge.
Out of fairness to my paid-up subscribers, I can’t reveal the name and ticker here.
And because this trend is still in its infancy, there really isn’t a good ETF to play it yet.
However, there will be more opportunities to profit as this market matures. This is a massive trend I’ll be tracking closely. I recommend you do too.
Editor, Project 5X
P.S.: To follow real-time updates on carbon prices – you can click here.