Equity and Carbon sequestration - processes and methods: Difference between pages

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1. ''Financial reporting - balance sheet''.
''Environmental concerns - greenhouse gases - natural processes.''


Amounts in the balance sheet of a company representing the book value of the interests of the shareholders.
'''Author: [https://www.linkedin.com/in/chadofficial/ Charitarth Sindhu]''', Environmental Sustainability & ESG Consultant


It includes share capital, cumulative retained profits (or losses), and other reserves.


It is also known as 'total equity' or 'shareholders' funds'.
Carbon sequestration refers to the process of capturing atmospheric carbon dioxide (CO<sub>2</sub>) and securely storing it within various physical or biological systems. This method, whether facilitated through natural mechanisms, technological innovations, or a blend of both, aims to diminish carbon footprints and stabilize greenhouse gas concentrations in the atmosphere.




The book value of total equity is equal to the book value of the company's net assets (or net liabilities).
==The process==


These two items in a balance sheet always balance - so long as there are no errors.
Carbon sequestration entails the capture and containment of carbon-based by-products like CO<sub>2</sub> and methane before their release from significant industrial sources, such as fossil fuel-powered facilities.  


This is what is meant by a balance sheet "balancing".
These captured carbon sources are then deposited into deep underground rock formations or introduced into carbon sinks like oceans, forests, or soils. The overarching goal is to combat climate change and mitigate global warming.




2. ''Financial reporting''.
==Carbon sinks==
Any system that absorbs more carbon than it emits functions as a carbon sink. This carbon sink acts as a reservoir—either artificial or natural—that accumulates and stores atmospheric carbon within physical and biological environments.  


Comparable amounts for financial reporting entities that are not companies.
Carbon sinks play a critical role in mitigating climate change by reducing greenhouse gas concentrations. They serve as essential buffers against excessive CO<sub>2</sub> build up which is a primary driver of the greenhouse effect and subsequent global warming.




3. ''Capital investment.''
==Types of carbon sinks==


The capital of a firm invested by those accepting the greatest degree of risk, for example the holders of ordinary shares (also known as common stock or common equity) in a company.
'''Terrestrial''': This category encompasses forests, grasslands, wetlands, and soils. Among these, tropical rainforests, due to their robust photosynthetic capacity, stand out as particularly effective carbon sinks.


'''Oceanic''': The ocean ecosystem plays a pivotal role in absorbing CO<sub>2</sub> from the atmosphere. Marine organisms, such as phytoplankton, utilize CO<sub>2</sub> for photosynthesis. Upon their death, organic matter sinks to the ocean floor, effectively sequestering carbon.


4. ''Securities.''
'''Geological''': Geological carbon sinks include underground formations like depleted oil and gas reservoirs, saline aquifers, and deep ocean sediments. Technologies like Carbon Capture and Storage (CCS) leverage these geological structures to permanently store captured CO<sub>2</sub> from industrial processes.


Securities representing the rights of the risk capital investors in 3. above.


For example, ordinary shares, also known as common stock.
==Methods of carbon sequestration==


'''Natural methods''': The soil, oceans, plants, and animals serve as natural carbon sinks or sponges. All organic life on Earth is carbon-based, and when plants and animals perish, a large portion of the carbon returns to the ground, where it affects global warming. During growth, plants and trees use photosynthesis to take in and store carbon dioxide while releasing oxygen. This process assists in removing carbon dioxide from the air.


5. ''Banking and bank regulation''.
'''Artificial methods''': involve capturing carbon emissions at the source (such as factory chimneys) and then burying them. Some popular methods include utilizing carbon by-products for graphene production, a vital component in the production of tech devices like smartphones or computer processors.  


Abbreviation for common equity.
Carbon Capture and Storage (CCS), captures CO<sub>2</sub> from fossil fuel-based power generation or industrial activities such as cement or steel-making. This captured CO<sub>2</sub> is subsequently compressed and injected into rock formations for permanent storage.




6. ''Net asset value.''
==Conclusion==
Prioritising the conservation and restoration of carbon sinks presents a critical opportunity to leverage their substantial potential in safeguarding the Earth's climate, biodiversity, and the well-being of future generations. By preventing the planet's temperature from exceeding a 2°C increase, concerted efforts in carbon sequestration can help mitigate the impacts of climate change.


The net value of an asset, after deducting any debt relating to it or secured on it.


For example, the value of a residential property, after deducting the amount of a mortgage borrowing secured on it.
==See also==
* [[Carbon capture]]
* [[Carbon capture utilisation and storage]]  (CCS)
* [[Carbon footprint]]
* [[Carbon sequestration]]
* [[Carbon sink]]
* [[Climate change]]
* [[Global warming potential]]
* [[Greenhouse gas]]
* [[United Nations Environment Programme]]  (UNEP)
* [[United Nations Framework Convention on Climate Change]]  (UNFCCC)


If the value of the borrowing exceeds the value of the asset, the situation can be described as 'negative equity'.


==Other resources==


:<span style="color:#4B0082">'''''Example: Equity and Negative equity'''''</span>
*[https://unfccc.int/resource/climateaction2020/tep/thematic-areas/carbon-capture/ UNFCCC resources - Carbon capture]


:A house is worth EUR 400k.
*[https://www.unep.org/resources/report/carbon-dioxide-capture-and-storage/ UNEP - Carbon Dioxide Capture and Storage]


:A borrowing of EUR 300k is secured by a mortgage over the house.
*[https://www.nationalgrid.com/stories/energy-explained/what-carbon-sequestration/ The National Grid - What is carbon sequestration?]


:The net worth is the difference between the value of the the house (asset) EUR 400k and the borrowing (liability) EUR 300k
[[Category:Accounting,_tax_and_regulation]]
 
[[Category:Financial_products_and_markets]]
:400k - 300k = EUR 100k
[[Category:The_business_context]]
 
 
:The Equity in the house is the difference between the current value, and any loans secured over it.
:This is also EUR 100k.
 
 
:If the value of the house falls to EUR 250k, the borrowing now exceeds the value of the asset.
 
:This is 'negative equity' (of EUR 50k = 250k - 300k).
 
 
7. ''Law''.
 
A legal system that resolves disputes between persons by resort to principles of fairness and justness.
 
 
8. ''Ethics - governance''.
 
Fair treatment between different individuals and different groups.
 
 
:<span style="color:#4B0082">'''''Equity & inclusion are priority for investors'''''</span>
 
:“Diversity, equity and inclusion is emerging as a priority topic for investors, with some of the world’s largest asset managers reporting increased engagement with portfolio companies in this area."
 
:''FitchRatings - November 2021.''
 
 
 
== See also ==
* [[An introduction to equity capital]]
* [[Asset manager]]
* [[Assets]]
* [[Balance]]
* [[Balance sheet]]
* [[Blue chip]]
* [[Book equity]]
* [[Book value]]
* [[Capital]]
* [[Capital employed]]
* [[Capital structure]]
* [[Common equity]]
* [[Common law]]
* [[Common stock]]
* [[Compound instrument]]
* [[Cost of equity]]
* [[Debt]]
* [[Debt for equity swap]]
* [[Debt to equity ratio]]
* [[Diversity]]
* [[Dividend]]
* [[Dividend growth model]]
* [[Entity]]
* [[Equality]]
*[[Equitable]]
* [[Equity accounting]]
* [[Equity beta]]
* [[Equity capital]]
* [[Equity cost of capital]]
* [[Equity instrument]]
* [[Equity investments]]
* [[Equity market]]
* [[Equity method]]
* [[Equity risk]]
* [[Equity risk premium]]  (ERP)
* [[Equity structured deposit]]
* [[Equity swap]]
* [[Financial markets]]
* [[Fitch]]
* [[General equity risk]]
* [[Green equity]]
* [[Hybrid capital]]
* [[Inclusion]]
* [[Kay Review]]
* [[Liabilities]]
* [[Liabilities and equity]]
* [[Market/book ratio]]
* [[Member]]
* [[Mezzanine]]
* [[Mortgage]]
* [[Negative equity]]
* [[Net assets]]
* [[Net worth]]
* [[NOSH]]
* [[Ordinary shares]]
* [[Own funds]]
* [[Private equity]]
* [[Quasi-equity]]
* [[Reporting entity]]
* [[Reserves]]
* [[Return on equity]]
* [[Risk]]
* [[Share]]
* [[Share capital]]
* [[Shareholder]]
* [[Shareholder value]]
* [[Shareholders’ funds]]
* [[Shareholders’ wealth]]
* [[Stakeholder]]
* [[Statement of changes in equity]]
* [[Statement of shareholders' equity]]
* [[Stock]]
* [[Total Loss Absorbing Capacity]]
* [[Total return swap]]
 
[[Category:Compliance_and_audit]]
[[Category:Corporate_finance]]

Latest revision as of 06:00, 29 March 2024

Environmental concerns - greenhouse gases - natural processes.

Author: Charitarth Sindhu, Environmental Sustainability & ESG Consultant


Carbon sequestration refers to the process of capturing atmospheric carbon dioxide (CO2) and securely storing it within various physical or biological systems. This method, whether facilitated through natural mechanisms, technological innovations, or a blend of both, aims to diminish carbon footprints and stabilize greenhouse gas concentrations in the atmosphere.


The process

Carbon sequestration entails the capture and containment of carbon-based by-products like CO2 and methane before their release from significant industrial sources, such as fossil fuel-powered facilities.

These captured carbon sources are then deposited into deep underground rock formations or introduced into carbon sinks like oceans, forests, or soils. The overarching goal is to combat climate change and mitigate global warming.


Carbon sinks

Any system that absorbs more carbon than it emits functions as a carbon sink. This carbon sink acts as a reservoir—either artificial or natural—that accumulates and stores atmospheric carbon within physical and biological environments.

Carbon sinks play a critical role in mitigating climate change by reducing greenhouse gas concentrations. They serve as essential buffers against excessive CO2 build up which is a primary driver of the greenhouse effect and subsequent global warming.


Types of carbon sinks

Terrestrial: This category encompasses forests, grasslands, wetlands, and soils. Among these, tropical rainforests, due to their robust photosynthetic capacity, stand out as particularly effective carbon sinks.

Oceanic: The ocean ecosystem plays a pivotal role in absorbing CO2 from the atmosphere. Marine organisms, such as phytoplankton, utilize CO2 for photosynthesis. Upon their death, organic matter sinks to the ocean floor, effectively sequestering carbon.

Geological: Geological carbon sinks include underground formations like depleted oil and gas reservoirs, saline aquifers, and deep ocean sediments. Technologies like Carbon Capture and Storage (CCS) leverage these geological structures to permanently store captured CO2 from industrial processes.


Methods of carbon sequestration

Natural methods: The soil, oceans, plants, and animals serve as natural carbon sinks or sponges. All organic life on Earth is carbon-based, and when plants and animals perish, a large portion of the carbon returns to the ground, where it affects global warming. During growth, plants and trees use photosynthesis to take in and store carbon dioxide while releasing oxygen. This process assists in removing carbon dioxide from the air.

Artificial methods: involve capturing carbon emissions at the source (such as factory chimneys) and then burying them. Some popular methods include utilizing carbon by-products for graphene production, a vital component in the production of tech devices like smartphones or computer processors.

Carbon Capture and Storage (CCS), captures CO2 from fossil fuel-based power generation or industrial activities such as cement or steel-making. This captured CO2 is subsequently compressed and injected into rock formations for permanent storage.


Conclusion

Prioritising the conservation and restoration of carbon sinks presents a critical opportunity to leverage their substantial potential in safeguarding the Earth's climate, biodiversity, and the well-being of future generations. By preventing the planet's temperature from exceeding a 2°C increase, concerted efforts in carbon sequestration can help mitigate the impacts of climate change.


See also


Other resources

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