MOBILISING PRIVATE SECTOR FINANCE
4.3
Are corporations allocating capital towards climate action?
T o meet our climate targets globally, large polluting cor- porations play a key role in reducing greenhouse gas emissions. The top 150 pollut- ing companies in the world contribute to over 80% of the world’s emissions, so their transition to cleaner and greener technologies and processes is critical to meet net zero by 2050. For this transi- tion to be successful, it should protect vulnerable populations, provide new employment opportunities, and avoid deepening social inequalities as indus- tries invest in and adapt to sustainable practices. Corporations have to align cli- mate goals and investments with social responsibility, ensuring that both envi- ronmental and societal challenges are addressed. Since 2023, certain trends have developed in what some of the world’s most polluting companies are disclosing and allocating in their efforts to become green. The investor-led initiative Climate Action 100+ publishes annual updates on the climate performance of 150 of the world’s largest corporate green- house gas emitters through its Net Zero Company Benchmark. The latest results, from 2023, indicate that cor- porate action on the just transition is still in its early stages – despite growing expectations from investors that com- panies decarbonise while managing the social risks and opportunities of their transition strategies. The initiative also reports on capital allocations made by the same corporations. The indicator on capital allocation covers the align- ment of corporate capital expenditure towards climate and green activities and is divided into three parts:
When we talk about carbon emissions, we must talk about the root cause: corporations. Creating transparency with data can lead to accountability. Shafaq Ashraf and Sangeeth Selvaraju , Grantham Research Institute on Climate Change and the Environment
1. Brown investments: This met- ric examines whether a company discloses the amount of its capital expenditure allocated to unabated carbon-intensive assets or products. Unabated carbon-intensive assets refer to assets or products with a high carbon footprint relative to their output and do not use any car- bon removal technologies, namely brown assets. 2. Green investments: This metric assesses whether a company reports the value of its capital expenditure directed towards climate solutions during the most recent reporting period. Companies should clearly define these solutions, ideally ref- erencing a formal taxonomy or classification system. 3. Future green investments: This is a forward-looking metric that assesses whether a company discloses its planned capital expend- iture allocated toward future climate solutions. Among the 150 companies, only 28 disclosed their capital expenditure towards unabated carbon-intensive assets, 44 reported their 2023 capital expenditure allocated to green invest- ments, and 48 disclosed their future plans for green investments. These disclosures are illustrated in Figure 1. Figure 2 further explores the detailed capital allocation of companies that have provided actual figures. The results indicate that capital expenditure disclosure remains lim- ited, with very few companies being transparent about their current invest-
64
Financing a Just Transition
Made with FlippingBook - Online magazine maker