75% Organisations Say Net Zero Goals Not Achievable Without Climate Technologies: Capgemini
High green premiums mean further investment and regulation are required to ensure commercially viable products and services.
Many technologies that are able to address climate change are already available and will play a critical role in helping businesses reduce greenhouse gas emissions, according to Capgemini Research Institute’s recent report on climate technologies.
Three-quarters of organisations surveyed said they will not achieve their sustainability goals without climate technologies. However, 77% executives suggested that product costs are likely to increase due to the green premium attached to these technologies and they are unwilling to pay this markup.
The findings were derived from a survey of 1,350 senior executives from organisations that have plans to decarbonise or reach net-zero levels along with 500 large venture capitalists and financial services organisations, covering 16 industries across 13 countries, including India.
High Hopes From Climate Tech
Growth in climate technologies, including renewable power and electric vehicles, has helped accelerate decarbonisation efforts. Others such as low-carbon hydrogen, carbon capture and alternative fuels could help businesses achieve sustainability goals. The surveyed executives expect climate technologies to contribute to 37% of their organisation’s decarbonisation or net-zero goals, and 65% of organisations plan to increase investment in climate technology in the next two years.
Green Premium Barrier To Adoption
Close to eight in 10 (77%) executives suggested that their product costs are likely to increase due to investment in climate technologies. This can be attributed to factors such as higher R&D, capital and operating costs, plus cost of adapting manufacturing processes.
Research revealed that organisations are willing to accept around 9% increase in product cost due to the adoption of climate technologies. However, the existing green premium for clean products is significantly higher. For example, cost of low-carbon cement produced using carbon capture is estimated to be 75–140% higher than conventional cement, and sustainable aviation fuel is estimated to cost 123% more than conventional jet fuel.
Pockets Of Rapid Progress
There are pockets of rapid scale up in adoption of climate technologies, such as solar photovoltaic, electric vehicles, carbon capture for cement, green hydrogen for steel and SAF for the aviation sector. Executives in these industries expect rapid technology adoption—within three years for EVs, four years for solar PV, three years for SAF and within two years for carbon capture in cement.
Addressing The Investment Gap
Research found that, on an average, organisations plan to increase investment in climate technology by 7.7% in the next two years. However, average annual investment in environmental sustainability initiatives and practices across industries represented only 0.92% of total revenue in 2023.
This means the current investment in environmental sustainability of the top 2,000 largest companies globally represents less than $500 billion each year overall. This is a small portion of the $1.8 trillion of estimated global investment in clean energy in 2023, and far below the $4.5 trillion a year required in the early 2030s.
Venture capital funding and financial institutions are already filling some of the gap. The report found that 37% of surveyed VCs plan to increase investment in climate technologies in 2023, 48% for 2024 and 56% for 2025. Around 47% of asset management firms and banks planned to increase climate tech financing in 2023, with 46% planning to do so in 2024 and 53% in 2025. This increased investment will be focused on EVs (for 55% of them), decarbonisation software (45%), biofuels (36%) or nuclear (33%).
