Trane Technologies (TT)

Company website 2020 Financial Report Stock Analysis 2020 ESG Report

7.7

Million Metric Tons

of GHG emissions were avoided in 2020 through Trane’s products

7.3^%

Reduction

in Trane's GHG emissions intensity in 2020

8^%

Improvement

in water efficiency, 2019 - 2020

View Our Analysis

The Path to Drawdown: High-Efficiency Heat Pumps

Buildings and construction account for roughly 38% of global CO2 emissions and about 35% of total energy-use. More than one-third of that is for heating and cooling, which could cut energy use by up to 30-40%.

Heat pumps are the technology that can most effectively increase heating and cooling efficiency. Heat pumps extract heat from the air and transfer it inside-out for cooling, and outside-in for heating the building. The ground, air, or water can be the source of or outlet for that heat.

Heat pumps are a technology that’s well-understood, easy to adopt, and already in use around the world. They can supply indoor heating, cooling, and hot water, all from one integrated unit. With high efficiency, they can dramatically reduce building energy use. When paired with renewable energy sources, they can virtually eliminate all emissions from heating and cooling.

According to Project Drawdown, high-efficiency heat pumps need to keep growing mildly between now and mid-century to help achieve decarbonization:

<::marker> In 2018 high-efficiency heat pumps comprised 3% of the market for delivered heat globally
<::marker> To stay below 1.5°C of global warming, high-efficiency heat pumps need to grow enough to account for 4.3% of that market by 2060
<::marker> That’s 0.86% growth annually between 2018 and 2060

If they can grow at this rate, heat pumps can help avoid up to 9.3 gigatons of GHG emissions.

About

Trane Technologies (stock ticker: TT) designs, manufactures, sells and services a diverse portfolio of climate control products and services for heating, ventilation and air conditioning (HVAC) and transport solutions.

TT's Role in Drawdown

Trane offers a wide range of products and services (p. 5), from air conditioners, building management systems, heat pumps, and refrigeration systems.

When it comes to heat pumps for the residential market, Trane offers thirteen different models. The most energy efficient model offers an estimated energy saving of 60% compared to competitors’ systems.

They also provide commercial customers with building automation systems that optimize their HVAC equipment and lighting.

Also for commercial customers, Trane offers thermal energy storage that gives building owners load flexibility, advises strategies for renewable energy procurement and distributed renewable energy resources to help organizations to become independent from the traditional utility grid.

In all, Trane’s revenue from these and other products and services has grown steadily over the last few years, increasing by 3.38% annually since 2016.

TT: What We Like

Trane Technologies has been focused on enhancing the sustainability of their business and cutting their carbon footprint. In 2020, Trane achieved (p. 1) several sustainability targets compared to the 2019 baseline:

<::marker> They reduced 54,681 metric tons of CO2e from their operations
<::marker> Their products helped customers avoid 7.7 million metric tons of CO2e emissions
<::marker> They generated 39% of their electricity from renewable sources

On top of these landmarks, they’ve proactively set targets for 2030 (p. 1) to:

<::marker> Reduce customer carbon footprint by 1 gigaton, or 1 billion metric tons of CO2e
<::marker> Achieve carbon neutral operations
<::marker> Reach zero waste disposed of in landfills
<::marker> Achieve 10% absolute reduction in energy consumption

What We Want to See Improve

Reduce Absolute GHG Emissions

We commend Trane’s commitment to become carbon neutral by 2030. They propose (p. 23) to do this by phasing out refrigerants with high global warming potential, finding ways to reduce their energy use by 10%, increasing renewable energy to power their operations, and enhancing energy efficiency throughout their operations. While these are all the right steps to take, we want Trane to go even further by committing to zero absolute emissions rather than carbon neutrality.

Transition to Renewable Energy

As part of their effort to achieve carbon neutrality, Trane plans to increase their use of renewable energy. We believe this is a commendable commitment. But we want them to get more serious about renewable energy than they now seem to be. In 2020, renewable energy accounted for only 0.52% (p. 28) of Trane’s total energy use, while natural gas, gasoline and diesel accounted for 44.8%, 40.6%, and 10.4%, respectively. We urge Trane to eliminate fossil fuel usage and switch to renewables as soon as possible.

Push Suppliers to Reduce Emissions

We’re impressed with Trane’s Supplier Sustainability Expectations, which outlines environmental expectations that are much more detailed and stringent than many companies’ supplier codes of conduct. It includes expectations for energy management, GHG monitoring, and transitioning away from high global warming potential gases. But given Trane’s own commitment to reducing their emissions, and given that their scope 3 emissions account for more than 99% of their total emissions, Trane should set stronger expectations for suppliers to reduce their own emissions rather.

Related Heat Pump Stocks in the Climate Index

View All Climate Index Stocks →

Allocated	Company	Description
2.88%	Carrier Global (CARR)	Carrier equips buildings with high-efficiency HVAC systems to improve energy efficiency - key to cutting emissions in the building sector
2.74%	Trane Technologies (TT)	Trane makes and sells AC, building management, heat pumps, and refrigeration systems, helping buildings achieve energy efficiency and emission cuts
0.69%	Lennox International (LII)	Lennox makes high-efficiency heating, ventilation, air conditioning and refrigeration products, helping building managers cut energy use and emissions