Fortescue Metals Group Limited (ASX: FMG) shares are in my portfolio even though it's one of Australia's leading carbon emitters.
The iron ore company digs up a lot of raw material. But it takes a significant amount of fossil fuels to get the iron out of the ground, onto trucks and trains, and then onto boats.
Fortescue recently made an announcement that indicated it emits three million tonnes of CO2 equivalent emissions per annum.
It also means the business is exposed to fuel price volatility, currently costing Fortescue a significant sum of money.
But it's the company's plans relating to decarbonising and green energy that attracted me to the business.
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Net zero by 2030
Fortescue has announced a US$6.2 billion plan to "eliminate fossil fuel use and achieve real zero terrestrial emissions (scope 1 and 2) across its iron ore operations by 2030".
Management believes his initiative will avoid three million tonnes of CO2 per annum. Fortescue pointed to the displacement of approximately "700 million litres of diesel and 15 million GJ of gas per annum by 2030".
The net operating cost savings are expected to be US$818 million per annum from 2030. Cumulative operating cost savings of US$3 billion are expected by 2030, with a payback of capital by 2034. That's at market prices at the time of the announcement. This might be helpful for the Fortescue share price as it saves on operating costs.
The business also suggests this will establish a "significant new green growth opportunity by producing a carbon-free iron ore product and through the commercialisation of decarbonisation technologies".
So while Fortescue is one of the worst offenders when it comes to emissions, it has a huge plan to eliminate those fossil fuels from the business.
I also appreciate the company's plan to produce green hydrogen and green ammonia to help various parts of the economy to decarbonise. This includes areas such as aviation, boating, and machinery. I believe this can help the Fortescue share price over the long term.
Positive management commentary
Fortescue founder Andrew Forrest has a vision of what the business can achieve in the green space. When the decarbonisation plan was announced, Forrest said:
We are already seeing direct benefits of the transition away from fossil fuels — we avoided 78 million litres of diesel usage at our Chichester Hub in FY22 — but we must accelerate our transition to the post fossil fuel era, driving global scale industrial change as climate change continues to worsen. It will also protect our cost base, enhance our margins and set an example that a post-fossil fuel era is good commercial, common sense.
Fortescue, FFI and FMG, is moving at speed to transition into a global green metals, minerals, energy and technology Company, capable of delivering not just green iron ore but also the minerals, knowledge and technology critical to the energy transition.
Fortescue share price snapshot
Over the last month, shares in the iron ore miner have risen by 29%.
