Net zero investments to get worldwide boost as corporates step up green ambitions
Corporates worldwide are planning to give their net zero investments a major capital boost in the next few years, according to fresh data shared with Net Zero Investor today.
On average, large companies will include a 22% net zero-related investment hike in their financial budgets for next year.
This ambitious investment intention is reflected across all regions: UK corporates plan the largest investment increase globally at 36%, followed by a 32% hike by Australian businesses, the data showed.
High-emission firms in carbon intensive industries indicated they plan to increase their net zero spending the most, such as manufacturing (26.9%), logistics & transport (24.3%) and resources & mining (22%), according the research by global business financial research firm East & Partners and communications consultancy Impact & Influence.
Rishi Bhattacharya, the CEO and founder of Impact & Influence, said the surge in net zero investments is primarily due shareholder and regulatory pressure.
However, different other factors play a role too, he said, such as a compelling climate change science, industry, business and supply chain risks, investor appetite, public and political pressure.
“And, of course, commercial opportunity,” Bhattacharya added.
In the UAE, host to COP28 at the end of next month, corporates said they plan to spend 21% more on cutting carbon emissions next year.
Across the three largest emitting economies, US-based confirmed to the researchers they are willing to spend 28% more on measures that should align their operations and assets more in line with the Paris Agreement.
Meanwhile, in India and China, investment jumps of 18% and 12% can be expected, respectively.
The lowest average increase in net zero and climate-related investment hikes will most likely take place in Kenya, as corporates across the East African country suggest they’d be willing to spend a mere 7% more on investments that should speed up their net zero efforts.
The dire number comes only two weeks after the government of Kenya hosted the UN-backed Africa Climate Summit, during which a host of African companies and investors made bold pledges to significantly boost their net zero-related investments.
Access to funding
Interestingly, many corporates plan to look for fresh sources of funding to finance their green efforts.
Just under half of businesses will turn to their current primary transaction bank or direct shareholders contact for access to fresh funds, while close to a fifth plan to use a different provider than their main lender, and a similar number said that they intend to use a specialist sustainability lender.
“Most leading transaction banks are targeting net zero financing as a growth revenue stream, and they account for just under half of this large corporate lending market, but at the same time alternative sustainable finance providers are rapidly capturing market share,” said Paul Dowling, the co-founder and principal analyst of East & Partners.
Specialist sustainability lenders have made stronger inroads into the UK, US and Japan than in other climate finance markets around the world, with 27.4%, 26.3% and 26.1% of companies based respectively in those countries expecting to use their services next year, the research showed.
Accessing sustainable finance via capital markets is most likely in the US (22.1%), followed by Australia (20.8%).