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Will ESG Credentials Power Apple Even Higher?

This past week, Apple ( (AAPL) - Get Apple Inc. Report) pledged to become carbon neutral across all aspects of its business by 2030. Since the announcement the stock is down slightly ~(2%), though performance this year has been solid, up over 31%.

The corporate side of Apple was already considered to be carbon neutral, so the company is extending this to its manufacturing and supply chain processes. The company plans to increase efficiency for 75% of its carbon cutback, and then develop “innovative carbon removal solutions” for the remaining 25%.

If all goes to plan, by 2030 no Apple device will have contributed to the buildup of greenhouse gases in the atmosphere. Apple is consistently regarded as one of the top companies in promoting ESG (Environmental, Social, and Governance) practices (see their dedicated site here) and this will further burnish their reputation.

Tim Cook, Apple CEO, said, “Businesses have a profound opportunity to help build a more sustainable future, one born of our common concern for the planet we share… with our commitment to carbon neutrality, we hope to be a ripple in the pond that creates a much larger change.”

Being Carbon neutral, when emissions are balanced out by carbon savings elsewhere, has fast become a desirable objective for companies around the world in the face of climate change. Going green can help boost sales as customers increasingly look for ethical options, and also help avoid regulatory scrutiny.

Tesla's ( (TSLA) - Get Tesla Inc Report) path to profitability, for example, has partly been driven by other auto companies (who need to meet certain regulatory emissions hurdles) buying regulatory credits from them (over $425mm last quarter). 

Microsoft’s ( (MSFT) - Get Microsoft Corporation Report) aggressive pledge to be carbon neutral going back to the founding of the company is one of the reasons it is an ESG darling.

Regardless of whether companies are just ticking the box in order to get into more ESG-funds or they are truly committed to aggressive environmental improvements, investors should expect to see an on-going stream of aggressive ESG-related pledges