Companies see more business opportunities from tackling climate change than ever
before, with the world's biggest businesses now identifying nearly $5
trillion in potential gains — according to data released by
CDP, as governments convene this week in Azerbaijan for
COP29.
Expectations have increased substantially, with the world’s largest 500
businesses raising the potential financial benefits they see from $2.1
trillion in 2018 to $4.8 trillion in 2023 — more than doubling (127
percent) in the past six years.
The analysis comes from CDP — the non-profit that runs the global disclosure
system for investors, companies, cities, states and regions to manage their
environmental impacts — based on listed companies representing over two-thirds
of global stock market value and thousands of private companies.[1]
From the wider group of all disclosing companies, opportunities totaling
$16 trillion were identified last year — a figure equivalent financially to
the combined GDP of Germany, India and Japan.
On a per-company basis, the average financial amount identified stands at
$3.1 billion — with the most impactful opportunities related to shifting
products and services, attracting new markets, and building climate
resilience.
“Companies increasingly see tackling climate change as an investment in the
future — and that's how governments need to start seeing their
NDCs
ahead of next year," said CDP CEP Sherry
Madera. “This analysis shows there
are trillions in opportunities across the global economy. Business now needs
governments to lay out plans with sufficient detail for the market to act,
realize these gains and kickstart green growth. With the focus of COP29
negotiations on finance, we believe the only route to success is seeing
ambitious business practice and the 1.5°C goal working hand in hand.”
Ambition vs progress
Despite the recognized lucrative opportunities, corporate progress to align core
business activities with climate goals is falling far short of what is needed:
According to the MSCI Sustainability Institute’s latest Net-Zero
Tracker, the scope
and pace of the decarbonization efforts of listed companies across 16 nations
could only deliver an emissions-reduction trajectory tied to a 2.8°C
scenario
— massively overshooting the 1.5°C limit necessary to ensure a livable
future.
CDP’s analysis reveals just 16 percent of companies generate the majority of
their revenue from low-carbon products, while the average reported share of
investment (CapEx) spent to deliver corporate climate-transition plans stood at
just 25 percent.
The data also show that companies are struggling to seize the projected
opportunities by adapting their product and service portfolios — suggesting that
stronger NDCs and policy frameworks are needed to help mobilize private
capital.
Failure to do so increases the prospect of significant business risks, but CDP
data show signs of hope — among the global 500 companies, awareness of the
financial impact of climate
risks
has improved: The companies analyzed identified over $1.3 trillion in
climate-related risks — a 29 percent increase from 2018 — with
regulation, market
impacts and acute physical
risks
the top concerns.
Transparency regarding corporate climate ambition vs
progress
is a critical input into this year’s COP negotiations to help governments set
and deliver targets that take a whole-of-economy approach. In a boost to the
availability of standardized environmental data to guide governments, the number
of companies reporting environmental data through CDP grew to over 24,800
companies (+7 percent) in 2024 — including those representing over 66 percent of
total global stock market value. The data disclosed through CDP's new
questionnaire is aligned with IFRS
S2,
the ISSB's climate standard, as the foundational baseline for CDP's climate
disclosure.
In addition to the corporate giants, over 12,500 small and medium
enterprises (SMEs) reported through CDP’s new SME-specific questionnaire — with
over 15,000 also disclosing nature data. This is a crucial development and a
positive sign that companies are moving beyond ‘carbon tunnel
vision’
in their climate-action strategies — mitigating and adapting to climate change
will take more than simply cutting greenhouse gas emissions; protecting and
enhancing biodiversity is also
critical.
“It is highly encouraging to see that more than 12,500 SMEs reported through
CDP's new SME questionnaire in this first year,” said Nigar
Arpadarai, UN Climate Change
High-Level Champion. “Disclosure is a crucial first step to action and will be
essential to future-proofing SMEs and supply chains across major and emerging
markets. CDP has been a great partner in my campaign to empower thousands of
small businesses to thrive in the green transition — helping SMEs to surface
information that will make it easier to understand where to focus their
attention, build capacity and act.”
Since host country Azerbaijan kicked off proceedings by declaring its intention
to expand its fossil fuel production by up to a
third over the next decade, the
likelihood of COP29 yielding any meaningful climate-action agreements or
financial commitments from the 200 countries in attendance is slim — which
means, as always, it’s up to the business
world
to drive the innovation and systems change needed to keep itself, and the
planet, in business for the long term.
[1]The analysis is based on 316 companies from a global 500 sample of the
world’s largest companies by market capitalization disclosing to CDP in 2018 and
344 companies disclosing to CDP in 2023.
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Sustainable Brands Staff
Published Nov 14, 2024 8am EST / 5am PST / 1pm GMT / 2pm CET