Protecting the natural resources of this beautiful earth is a priority for citizens around the world. That includes the United States, where two-thirds of adults surveyed say the country should prioritize developing renewable energy sources.
U.S. businesses increasingly focus on their corporate sustainability performance, paying more attention to resource management and implementing policies and processes for a greener environment and economy. Part of that commitment consists of environmental, social and governance (ESG) goals and investing. According to one report, ESG-focused institutional investment is expected to increase 84 percent to $33.9 trillion by 2026.
What Exactly is ESG Investing?
Also sometimes referred to as ESG integration, environmental, social and governance investing occurs when a business — often a large corporation —incorporates specific criteria into its decision-making processes. Those criteria and standards are part of a framework with an emphasis on non-financial factors that have an impact on a corporation’s long-term business success.
For investors, ESG criteria enable them to better evaluate a company’s environmental risks and how they are managed. With this data, they can more accurately screen potential investments to discern whether a company is dedicated to sustainable and ethical performance. Therefore, they are able to knowingly align their investments with their environmental, social and governance values.
The first of ESG criteria, environmental, centers on how a business safeguards the environment through corporate policies and actions — i.e., reducing greenhouse gas emissions or consuming less energy. Social criteria address how a corporation manages relationships with its employees, customers, vendors and the communities in which it operates. The third criteria, governance, focuses on a business’s leadership and the governance factors of decision-making, from internal controls to shareholder rights and measurement of corporate performance.
Why are ESG Goals Important?
For any size company, environmental, social and governance (ESG) goals aid in ensuring efficient resource management, identifying new markets and procuring metrics that show any possible areas for improvement. Without them, businesses risk losing investors — along with a positive reputation —and may be subject to fines for violating environmental regulations.
Often, though, ESG goals are not met, whether it is due to a lack of funding or inadequate company-wide support. When some stakeholders view ESG goals as an overall cost, they don’t see that the investment provides enough value.
Implementing and maintaining ESG goals typically is more costly in both time and financial resources, and the fees associated with ESG investing are higher because of the rigorous research and screening involved. When a product or process costs more but offers less of a financial return, decision-makers most likely are not interested.
ESG Investment and Transferable Tax Credits = A Positive Partnership
A company’s investment in ESG shows that its leadership and stakeholders know how it can markedly impact its risk and return profiles. And, it is possible to achieve ESG goals with a positive impact on a business’s bottom line. How? By using renewable energy transferrable tax credits to negate the higher costs of ESG investments.
Through the transferability feature enacted as part of the IRA, clean energy developers are able to sell Investment Tax Credits (ITCs) and Production Tax Credits (PTC) at a discount to eligible buyers. The buyers benefit by effectively reducing the total amount they will pay in federal corporate taxes.
Purchasing renewable energy transferable tax credits returns financial capital to corporations, which can be used to fund ESG initiatives and promote their ESG credentials. These renewable energy transferable tax credit transactions help businesses support their ESG goals and initiatives without the need to increase their net budgets.
The partnership of transferable clean energy tax credits and an ESG framework not only contributes to cost savings and increased transparency but also improves a company’s competitiveness in the market, boosts its reputation and builds trust with stakeholders. Corporations have the opportunity to boost the supply of clean energy without serving as a direct off-taker for them. That’s why so many businesses select all or part of the tax savings realized by buying Renewable Energy Transferable Tax Credits to support other initiatives surrounding sustainability practices.
The Effect of Renewable Energy Tax Credits for Carbon Offset
Some companies either choose or are required to purchase renewable energy credits (RECs). They can use the tax savings realized from renewable energy transferable tax credits to purchase them.
The REOX team has partnered with Zettawatts to help environmentally and socially-conscious businesses like yours achieve their ESG and carbon offset goals through a combination of transferable clean energy tax credits and purchases of RECs and Virtual Power Purchase Agreements. We ensure a transparent and secure clean energy marketplace where buyers like you can confidently engage in transactions that enhance your tax efficiency and sustainability efforts.
Contact us today to learn more. And, find out more about transferable energy tax credits here.
