How Financial Advisors Can Reduce Their Carbon Footprint in 2023

While your list of business objectives for 2023 probably doesn’t have emissions reductions at the top, if you are offering an ESG or sustainable investment solution, it’s important to walk the talk.

Bringing up sustainability in a client or prospect meeting won’t go over well if you sit down to the meeting and offer the client water in a plastic cup or bottle.

You might be surprised how strongly some clients, particularly younger ones, feel about supporting businesses that are pursuing sustainable practices.

One way to get started on your business’s sustainability journey is to calculate your carbon footprint and work to reduce it.

The good news is that the financial advice business is a service business. This means your emissions (the act of sending gas, heat, light, etc. into the air) are probably fairly low, at least compared to widget businesses. EY reports the average carbon footprint for a company in manufacturing is 30% direct emissions (and 60% indirect emissions), and the average carbon footprint for a company in services is only 3.0% direct emissions (and 97.0% indirect emissions).

It is relatively straight-forward to calculate your carbon footprint. For typical advisor businesses, the majority of emissions comes from three main areas: your office energy use, employee commuting and business travel. To reduce your carbon footprint, you must first understand where your emissions come from and gather the data associated with these activities.

To calculate your office energy use, sum up your utility bills for the year. These should cover all the energy you purchase to heat and cool your office, power your computer, and keep the lights on. Heating and cooling account for more than 72% of energy use in a building.

Getting a handle on your firm’s commuting footprint might require some data collection, but you can also estimate it.  You’ll need to know how each employee gets to work and back, how far they travel and how many days a year they commute.

For business travel, focus on air miles. The EPA reports that air travel contributes to 10% of U.S. transportation emissions, and account for 3% of the nation’s total greenhouse gas production. This is where the bulk of travel emissions come from, but you should also include rental car and taxi/ride share receipts.

Once you have all this data, you are ready to calculate your total carbon footprint.

1. Quantify Your Carbon Footprint Using a Calculator

There are many carbon calculators, ranging from simple to complex. Business calculators will allow you to input all types of energy sources including travel and events. There are also calculators dedicated to flights:

• The GHG Protocol developed the Scope 1, 2 and 3 standards to separate and quantify emissions from energy use. Scope 1 are direct emissions that come from combustion sources that you own. Indirect emissions are Scope 2, which is your purchased electricity or heat. Scope 3 is a little more complicated. There are 15 categories in which not all will be relevant to your business. The most easily quantifiable ones are business travel and commuting.  These are what all other calculators are derived from; however, the interface may be cumbersome to some who this is not their day job.
• The SME Climate Hub calculator, which is intended to help businesses set an emissions reduction target, is comprehensive.
• UC Berkeley’s Cool Climate provides a relatively easy-to-use calculator for any service-based business. It calculates Scope 1, 2, and 3 emissions.
• The United Nations’ International Civil Aviation Organization (ICAO) Carbon Emissions Calculator is dedicated to calculating emissions from air travel.

Once you input your information, you will know your footprint for the past year. Set that as your baseline and get to work reducing it.

2. Reduce Your Energy Use in Your Office

There are a number of ways you can do this, and the first step should be to inquire about a free energy audit from your utility company. Once you identify the full picture, you can implement some of these changes:

• Switch to renewables—Find out if your utility offers a renewable energy option.
• Make sure lights, heat, and air conditioning are off or turned down at night and on weekends.
• Change your air filters regularly so your HVAC system can work most efficiently.
• Replace any incandescent or fluorescent lighting with LEDs.
• Replace single pane windows with double glazed windows.
• Apply window film to south facing windows reduce heat gain.
• Install a smart thermometer.
• Purchase energy efficient office equipment. Look to the products that have Energy Star certification.

3. Reduce Emissions From Commuting

In today’s work from home environment, reducing your team’s commute time shouldn’t be complicated. Here are a few ideas: 

• Consider trading in your combustion engine vehicle for an electric one. The Inflation Reduction Act will have many provisions for tax credits on electric vehicle purchases.
• Offer employees the option to work from home a few days a week.
• Encourage cycling by providing secure bike parking and showers.
• Encourage public transit use with free or discounted transit passes.

4. Reduce Emissions from Business Travel

The biggest driver here is number of flights. Conducting more meetings over Zoom will decrease those emissions. Other suggestions include:

• Choose energy efficient accommodation. Search for hotels that are LEED certified or pursues green practices.
• Fly direct if possible (stopping uses more fuel).
• Fly economy as you will use less space per consumed unit of fuel.
• Use public transportation.

While this process may sound time intensive, it should only take a couple of hours each year. Remember to start where you are by calculating your current energy and emissions data. Going through this process will help better understand the levers to reduce your energy use and carbon emissions. You’ll gain valuable knowledge about emissions reductions measures that you can share with clients. Along the way, you may experience some cost savings for your business, too.

Sarah is Chief Sustainability Officer and co-founder of Vert Asset Management. For more information about Vert, please visit www.vertasset.com.