The Fortescue Metals Group Limited (ASX: FMG) share price is one to watch after it announced a target to achieve net zero Scope 3 emissions.
Fortescue has been making progress in its ambitious goal to pivot its mining business to be a 100% green company. Fortescue Future Industries (FFI) is the arm of the company that has the role of making this goal a reality. FFI has already achieved important targets earlier this year.
Fortescue announces net zero Scope 3 emissions target
Scope 3 emissions are greenhouse gases that are indirectly generated in the wider economy by the chain of activities relating to a business’ operations. Although Scope 3 emissions are not directly created by that company, the Scope 3 emissions are a consequence of that particular company’s business activities.
Fortescue announced today that it has a target to achieve net zero Scope 3 emissions by 2040. This includes all emissions across Fortescue’s entire global value chain.
FFI will be a key part of achieving this target with its green hydrogen.
The company said that crude steel manufacturing accounts for 98% of its Scope 3 emissions. Reducing emissions from iron and steel making is a focus. It will work with current and prospective customers on applying the technology, green hydrogen and ammonia from FFI.
Fortescue said it is also prioritising decarbonizing its own fleet of eight ore carriers and engaging with its shipping partners to reduce, with the aim to eliminate, emissions from shipping.
Additional medium-term targets
Fortescue outlined scaling targets on the path to its 2040 net zero Scope 3 emissions goal.
The medium-term targets are:
- A reduction in emissions intensity levels from the shipping of Fortescue’s ores by 50% by 2030 from FY21 levels.
- A reduction in emissions intensity levels by 7.5% by 2030 from FY21 levels from steel making by Fortescue’s customers.
FFI is also targeting the production of 15 million tonnes of green hydrogen annually by 2030. Fortescue said that this will underpin opportunities to work with customers and shipping partners on emissions reduction and elimination projects.
Fortescue Chief Executive Officer Elizabeth Gaines said:
“Climate change is the most pressing issue of our generation and at Fortescue, setting stretch targets is at the core of our culture and values and we are proud to set this goal to tackle emissions across our value chain.
“Fortescue has commenced its transition from a pure play iron ore producer to a green renewables and resources company, underpinned by the world’s first major carbon emissions heavy industry operation to set a target to achieve carbon neutrality by 2030.”
Final thoughts on Fortescue and the share price
Although the company has grand goals to pivot its business, it still currently follows the cyclical nature that mining companies follow. It will take time for the FFI division to become a major part of the overall Fortescue business. Until then, it’s iron ore that will be the key influence on Fortescue.
I like what Fortescue is doing with its FFI segment. These big goals and changes won’t happen overnight, however Fortescue is putting in the resources, time and energy required to make its goals an eventual reality.
The Fortescue share price has recently been having a bad time as the iron ore price has fallen. At the time of writing the Fortescue share price is down 2.7%.
I’m not put off by the drop in the share price and have recently seen it as an opportunity. Further falls in the iron ore price and the Fortescue share price are possible. However on the flip side, I don’t have a crystal ball to time the bottom, investors have to calculate what represents an opportunity.
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