Are corporations allocating capital towards climate action?
To meet our climate targets globally, large polluting corporations play a key role in reducing greenhouse gas emissions. The top 150 polluting 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 transition to be successful, it should protect vulnerable populations, provide new employment opportunities, and avoid deepening social inequalities as industries invest in and adapt to sustainable practices. Corporations have to align climate goals and investments with social responsibility, ensuring that both environmental 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 greenhouse gas emitters through its Net Zero Company Benchmark. The latest results, from 2023, indicate that corporate action on the just transition is still in its early stages – despite growing expectations from investors that companies 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 alignment of corporate capital expenditure towards climate and green activities and is divided into three parts:
1. Brown investments: This metric 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 carbon 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 referencing 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 expenditure 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 investments, 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 limited, with very few companies being transparent about their current investments in carbon-intensive (brown) assets. Although the number of companies reporting investments in climate solutions increases by 16 when considering current capital expenditure, and rises even further for future green expenditure, these figures represent only disclosure. The data reveals a general lack of transparency on sustainable capital allocation and highlights the need for more comprehensive and consistent reporting across the companies evaluated.
When examining the percentage of total capital expenditure allocated to green or climate-related investments, as illustrated in Figure 2, we observe that some companies are significantly ahead of others in their 2023 spending. Some of the key factors contributing to these differences are the sectors in which these companies operate, their geographical location and the regulatory requirements they face. Companies based in Europe tend to disclose more readily, partly due to regulations such as the Corporate Sustainability Reporting Directive, which requires companies to report how their activities align with the EU Taxonomy. Importantly, this analysis only considers current capital allocations and the companies’ existing assets, without delving into future investments or broader sustainability corporate strategies. By considering only current expenditures, companies may appear to be doing less than they plan for in terms of their transition to sustainability. However, the success of reaching net zero emissions hinges not only on present actions but on sustained and planned future investments in clean energy, climate solutions and decarbonisation technologies.
Data shows that while some companies have made progress in green investments, the overall level of transparency and action remains insufficient to meet global climate targets. Differences in capital expenditure reporting across sectors and regions highlight the need for consistent, long-term commitments. Achieving net zero by 2050 will require not only increased current investments but also clearer future strategies. By ensuring that transparent, future-oriented capital allocations support climate goals, firms can contribute significantly to the transition towards a low-carbon economy.
