South Pole, the world’s largest carbon-offsetting firm, is expected to be the next casualty of the Environmental, Social, and Governance (ESG) movement. ESG welcomes investments that promulgate net-zero energy policies that could be achieved by buying carbon offsets.
A bombshell New Yorker article from investigative journalist Heidi Blake determined the firm sold “environmentally worthless credits, while the developer of its biggest project [Kariba] secretly moved tens of millions of $ paid by Gucci, Porsche, Nestlé & others into offshore accounts.” Her findings follow a January 2023 report that determined South Pole’s Kariba project worsened the environment. The same January report found the company “marketed considerably more carbon credits than the emissions it prevented in Zimbabwe.” Only “27 million tonnes of avoided carbon emissions”—or two-thirds of its goal—were yielded.
The “avoided deforestation” Kariba project—aimed at discouraging tree removal and at preventing the “release of tens of millions of tons of greenhouse gas”—in the Lake Kariba region in Africa received approximately $100 million in credits from Volkswagen, Gucci, Nestlé, Porsche, and Delta Air Lines, for instance. By doing so, these companies could claim goods and services satisfy requirements to be “carbon neutral.”
MIT’s Climate Portal describes carbon offsets as “tradable ‘rights’ or certificates linked to activities that lower the amount of carbon dioxide (CO2) in the atmosphere.” Buying these certificates, in theory, is supposed to “offset” a buyer’s “CO2 emissions with an equal amount of CO2 reductions somewhere else.” But that is not the case with South Pole.
South Pole also isn’t the first peddler of faulty carbon offsets to face scrutiny.
Verra, a global “leading carbon standard” for voluntary carbon offsets that worked often with South Pole, was similarly investigated and found to be fraudulent. The Guardian newspaper determined that 94% of its rainforest offset credits, used by companies like Gucci, Disney, and Shell, were so-called “phantom credits” that didn’t lead to any meaningful reduction of carbon emissions.
These two case instances fall within a larger trend of shrinking demand for carbon credits.
Much like carbon offsets, high ESG scores often obfuscate environmental reality. As I noted here on the website in August, companies boasting high ESG scores don’t pollute any less than their non-ESG scoring counterparts:
The Financial Times highlighted these interesting findings from index provider Scientific Beta. The firm found deficiencies in highly-rated companies when measuring their carbon intensity—or “carbon emissions per unit of revenue or market capitalization”—against their environmental (E) rating.
The study found that, for example, a 92% reduction in carbon intensity investors gain ‘is lost when ESG scores are added as a partial weight determinant.’
Virtue signaling on the environment—by way of carbon offsets or employing ESG principles—undermines true conservation efforts. It’s encouraging, however, to see more reports on the shortcomings of carbon offsets that invite non-conservationist behavior.
To learn more about carbon offsets, go HERE.