Corporate Budgets Hold $1.3 Trillion of Untapped Climate Capital

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(Bloomberg) — Trillions of dollars are needed to meet the world’s climate targets, and a sizable share of that money may already be sitting inside corporate balance sheets.

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A study by the Netherlands-based nonprofit World Benchmarking Alliance found that if companies redirected a larger share of their existing capital expenditures toward low-carbon investments, they could unlock as much as $1.3 trillion for the clean-energy transition.

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The group analyzed about 1,600 companies worldwide and found the median share of spending currently devoted to low-carbon projects is just 7%. Raising that figure to 30% would free up vast new pools of capital, WBA said.

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Disclosure remains sparse. Only a quarter of the companies surveyed reported any low-carbon investment at all, underscoring what the group described as a major transparency gap.

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The findings come as the International Energy Agency maintains that keeping global warming in check is still achievable. In September, the IEA said reaching net-zero emissions by 2050 would require tripling renewable energy capacity by the end of the decade and increasing green investments to $4.5 trillion a year globally by the early 2030s.

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While governments and financial institutions are often seen as the primary sources of that funding, corporations themselves represent a largely underused lever, according to WBA Executive Director Gerbrand Haverkamp.

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Companies could shift spending toward research and development and scale up investments in electric vehicles, low-carbon steel, green ammonia and fertilizers, batteries, hydrogen production, regenerative agriculture and renewable power, Haverkamp said. But without clearer reporting, it’s difficult for investors and regulators to assess whether corporations are serious about transitioning their business models.

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“What we want to see is that every major company in the world develops a transition plan so these transition plans can be scrutinized by investors, by regulators, by stakeholders and by peer companies,” he said. “We’re not just interested in companies setting targets, we want to understand what their plan is to get there.” 

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Mandatory transition plans had been expected to form part of Europe’s new corporate sustainability rules this year. That requirement, however, was dropped from the final version of the EU’s so-called omnibus package, which includes green-related regulations.

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In its analysis, the WBA also found major blind spots on nature and biodiversity. Just 9% of companies quantified how biodiversity-related risks may affect their operations, finances or reputation, and only 2% have published early versions of nature-transition plans recommended by the Taskforce on Nature-related Financial Disclosures. 

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“The number of companies that actually understand their impact and dependencies on nature is still very, very low,” Haverkamp said. “It’s uncharted territory.”

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—With assistance from Frances Schwartzkopff.

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