- New analysis by CDP and Oliver Wyman finds that more than half of companies in high-emitting sectors are worried about access to funding for reducing carbon emissions. More than half of companies in high-emitting sectors are concerned about getting enough funding for reducing carbon emissions. They are worried about getting enough funding to reduce carbon emissions.
- Many companies are not reducing carbon emissions quickly enough, with only one in five making significant progress. Only one in five companies are making significant progress in important areas. Only one in five companies are making significant progress in key areas.
- In many industries, the economics are not changing fast enough to make it profitable to switch to greener business models.
- Electric utilities could be short by €285 billion by 2030, out of the €1.9 trillion required for renewable energy investments. By 2030, electric utilities could be short by €285 billion out of the required €1.9 trillion for renewable energy investments. to reach There is a need for €1.9 trillion in renewable energy investments. There is a need for €1.9 trillion in renewable energy investments.
- If companies do not invest more in green products and services to meet demand, 20% of European businesses expect to lose customers to alternative solutions. 20% of European businesses expect to lose customers to alternative solutions if they do not invest more in green products and services. 20% of European businesses expect to lose customers to alternative solutions.
CDP and Oliver Wyman's new analysis shows that 70% of European companies allocate less than 25% of their capital expenditures towards transitioning to a net-zero economy. Additionally, one-third of companies and more than half of high-emitting businesses have trouble accessing capital.
The report, Get the Money Moving, finds that while more European companies are setting emissions reduction targets, just one in five have made substantial progress. Capital investment levels play a crucial role in a company's ability to transition to a low-carbon business model.
The report highlights the progress and gaps in various sectors such as automotive, steel, and transport. Electric utilities in particular could be short by €285 billion out of the needed €1.9 trillion for renewable energy investments by 2030.
While some low-carbon technologies and products are emerging, business models remain underdeveloped, and government policies have not yet shifted the economic landscape decisively in favor of greener products and services, especially in the automotive sector.
If companies do not invest more in green products at a faster pace,, 20% of European businesses expect their customers to switch to alternative products and suppliers.
The steel industry is responsible for about 5% of carbon dioxide emissions. in the EU and is crucial for the region to achieve its objectives. However, with the current investment levels, the supply of green steel will fall short by 30% of meeting the demand by 2035.
Other significant reasons holding companies back from carrying out essential parts of transition plans included insufficient development of low-carbon product lines and technologies or efforts to reduce carbon emissions by suppliers. These were accompanied by a lack of involvement and commitment from customers in reducing emissions.
This gap between tangible business actions and stated climate goals persists despite most businesses stating they have a transition plan and targets to reduce emissions in place. This is based on an analysis of disclosure data from 1,600 European companies by CDP, the non-profit organization that operates the world’s environmental disclosure system. These businesses represent 89% of the region’s market capitalization.
The analysis highlights a dilemma for green financing: While many companies require support from financial institutions to bring projects to commercial scale, the financial sector has requested evidence that such initiatives can operate sustainably at this level. However, 67% of financial institutions disclosed through CDP that they are actively taking steps to align their portfolios with a 1.5-degree pathway.
The report urges businesses to allocate more of their spending to sustainable solutions, while also calling for policymakers to further create an environment where green initiatives can expand. It advocates for greater collaboration across the financial sector to spread risk involving development banks, private equity firms, insurance companies, traditional infrastructure financiers, and philanthropic organizations. This is in addition to leveraging the financial institutions’ own balance sheets.
Companies were considered to be making significant progress if they scored more than 50% across a five-factor framework: CapEx, product innovation, supplier decarbonization, engaging with customers, and steering the business.
Despite the upcoming CSRD also requiring more transparency in companies’ reporting on nature, the data also indicates that over half of European financial institutions do not have plans to ensure water security or set targets for preventing further deforestation.
Sherry Madera, CEO of CDP, stated: “Sustainable investments are not just a choice, they are a necessity. With many solutions emerging, this analysis shows significant opportunities for industries to innovate and lead. It uncovers pathways to scale impactful solutions, guiding companies and financial institutions towards a climate safe world. By disclosing high-quality data, companies can better identify where to invest to enhance their competitiveness, achieve their transition plans, and attract capital. Financial institutions can also use this information to engage and develop funding models that spread risk and enable business innovation, as can policymakers to target improvements for investment conditions in green initiatives.
“CDP data reveals clear insight into where companies are making progress in implementing crucial transition plan actions. It is by harnessing this information that we can bridge the gap between planning and action, fostering innovation, collaboration, and efficiency across all sectors. Collectively, we can close the implementation gap in time and channel funds into an economy that safeguards future generations.”
James Davis, Partner at Oliver Wyman, stated: “The shift to sustainability in Europe is gaining speed. This year’s report has uncovered many positive signs, with more companies implementing transition plans and increasing investment. However, most companies are finding it difficult to change their business models quickly and extensively. They are grappling with the fact that the economics of sustainable business models are usually less appealing and riskier than the existing ones they aim to replace. This also makes it more challenging for the banks and investors seeking to fund the transition, and many of the companies we examined mentioned that access to capital is a major concern.
“Collaborative efforts between companies and financial institutions can help address some of these challenges by reducing and sharing the risks. However, we also need effective government policies that offer clear incentives for greener products and services, as well as a stable framework to promote the type of long-term investment decisions required to achieve net-zero.”
The CDP Europe Report will be introduced at the CDP Awards Europe 2024 on March 26, organized in collaboration with the ChangeNOW summit in Paris and Euronews TV.
