The continued dependence on fossil fuels is not only a climate risk, but also a growing economic threat for major industries, a new report by the World Benchmarking Alliance (WBA) has found.
The WBA noted that many leading firms across key sectors are failing to put in place credible transition plans to manage the shift away from fossil fuels, however some sectors, such as electric utilities, have led the way in terms of low-carbon investment.
The report assessed 280 companies across sectors such as oil and gas, electric utilities, steel, and automotive, which collectively employ more than 15.4 million people, and are essential to global energy systems and infrastructure.
Economic risk
“Fossil fuel dependence is no longer just an environmental challenge; it is a clear and growing economic risk,” commented Gerbrand Haverkamp, executive director of the World Benchmarking Alliance.
“Our analysis shows that while some heavy-emitting companies are beginning to adapt, most are not yet translating ambition into credible, investment-backed transition plans. Those that do are not only reducing emissions, they are strengthening their long-term resilience.”
A stark gap
The findings indicate a ‘stark gap’ between long-term climate targets and the actions required to achieve them, noting that while many firms have announced long-term climate targets, only a small minority have credible, investment-backed plans to deliver on them.
It also found that the transition tends to stall when it comes to capital allocation, with oil and gas firms, for example, allocating less than a fifth (19%) of their capital expenditure into low-carbon activities, well below what’s required to align with a 1.5°C pathway.
At the same time, however, the WBA pointed to signs of progress – in electric utilities, some firms are already allocating more than 90% of their capital expenditure to low-carbon investments, indicating that ‘rapid transition is both technically and commercially viable when supported by clear policy signals’.
The WBA’s findings were published ahead of the First Conference on Transitioning Away from Fossil Fuels (TAFF), co-hosted by the Governments of Colombia and the Netherlands, which runs from 24 to 29 April.
“Credible transition planning is one of the clearest signals of real economy progress, and it must now become the norm for business,” Haverkamp added. “To help monitor business transitions, WBA is setting up the Integrated Transition Assessment, which will measure progress and provide the data and insights for what credible, connected, and consequential corporate action looks like.” Read more here.
