The Fortescue Metals Group Limited (ASX: FMG) share price has beaten the broader market by a significant margin this afternoon.
Shares in the iron ore miner closed 1.33% higher at $16.76 on Friday. Meanwhile, the S&P/ASX 200 Index (ASX: XJO) was steep in the red, posting a hefty 1.87% loss.
The S&P/ASX 200 Materials Index (ASX: XMJ) also struggled, closing the day with a 0.49% loss.
So why is Fortescue green in a sea of red?
Investors may be staying optimistic amid the company's massive $9.2 billion decarbonisation plans that were announced on Tuesday. Fortescue intends to emit zero terrestrial emissions from its iron ore operations by 2030, which will confer the company several benefits.
First, it will reportedly derisk its product as governments use increasingly heavy-handed tactics to get emissions under control, including by issuing penalties. Staying behind the ball now may prevent Fortescue from being blindsided by fines and possible restrictions on its operations later.
There may also be more tangible benefits for the company to offer a net-zero product.
Increased demand
ASX lithium shares like Vulcan Energy Resources Ltd (ASX: VUL) are building an economic moat by exploring lithium geothermal extraction methods that release no emissions into the atmosphere. It's posited that Vulcan's output may command higher prices over lithium produced from hard-rock mining.
A carrot and stick situation may unfold where governments may favour or even enforce that companies buy from aspiring net-zero producers such as Fortescue and Vulcan. This, in turn, would shrink the total supply of net-zero elements and commodities, creating further scarcity.
My Fool colleague James also notes that Fortescue expects to realise significant cost savings from the transition to net zero.
Decreased costs
Fortescue expects to save $US818 million per year by 2030. It's expected to recoup its multi-billion dollar investment by 2034.
Cost savings will reportedly be seen from the company moving away from fossil fuels and instead relying on renewable energy generators. Its savings will also be boosted by Australian carbon credit units and not paying carbon offset purchases.
In practice, the company will deploy renewable energy generators and green-powered vehicles for its fleet and mining equipment. Studies are underway to harness wind and solar energy sources at its exploration sites.
Fortescue share price snapshot
The Fortescue share price is down 15.57% year to date. Meanwhile, the S&P/ASX 200 Index is down 13.37% over the same period.
The company's market capitalisation is $51.6 billion based on the current share price.
