Government action is key to unlocking private sector investment at scale, business leaders around the world say. Barometer of commercial breakthroughs

• 91% of business leaders surveyed view the transition to net zero as an investment opportunity.
• Only 1% believe the transition to net zero is on track across the 11 sectors estimated to be responsible for 70% of global emissions.
• Two-thirds of companies identify the lack of a strong investment case and slow infrastructure development as the most pressing obstacles to accelerating the transition.
• Business leaders stress that without long-term investment-friendly policies, the next wave of large-scale investment is at risk.
• Long-term industrial policies including streamlined permitting, mandatory application, direct investment in infrastructure and stronger international coordination are needed to increase private sector investment.
• Nine out of ten companies are willing to invest more if governments implement policies to remove sectoral barriers.

Geneva, Switzerland – October 31, 2024 Business leaders have warned that without bold government policy, the next wave of large-scale investment in the net-zero transition will be at risk. An overwhelming 91% of executives view the transition as an investment opportunity, according to responses from 250 executives of leading companies around the world, with a combined market capitalization of more than $2 trillion. However, only 1% of companies believe that the transition is on track.

The warning is coming a new report launched today by the World Business Council for Sustainable Development (WBCSD) in partnership with Bain & Company, the Breakthrough Agenda and the Marrakech Partnership. The report highlights that achieving plans to halve emissions by 2030 and meet the 1.5°C climate target depends on private sector investment.

The report shows that companies have invested significantly in the transition to carbon neutrality. Three quarters (74%) of companies surveyed have increased their investments in the transition to carbon neutrality over the past three years, driven by growing business opportunities in their sector, with one in three companies (35%) committing more than half of their capital investment.

However, two thirds (66%) of business leaders identify the lack of a strong investment case and slow infrastructure development as the most pressing obstacles to accelerating large-scale investment. Companies say macroeconomic challenges are delaying project development, 50% inflation of factory investment costs and rising prices of renewable energy, slow permitting processes, uncertain revenue models, limited supply of low-carbon fuels, long queues for the interconnection of networks and slow deployment of charging networks; All of this puts at risk the next round of investments needed to achieve net zero targets.

Nine out of ten (90%) of respondents say they would invest more if governments implemented policies to remove sector-specific barriers.

Peter Bakker, President and CEO of WBCSD shared “This report is the first examination of the net-zero transition from a business perspective, providing a clear overview of where we stand and where we fall short. Most importantly, it shows the critical gaps we need to close to make the transition to net-zero possible. Businesses are stepping up, but without decisive government action, we risk missing out on the unprecedented investment opportunities that await us.

According to the report, businesses are frustrated that current policies and market structures are failing to reward low-carbon investments, and in hard-to-decarbonize sectors they are highlighting the need to go further. beyond a reliance on voluntary demand that is not growing at the rate needed for sectors such as steel, cement, aviation, shipping and chemicals.

The report highlights how governments can unlock substantial private sector investment by removing market barriers to the deployment of low-carbon technologies. Businesses identify the need for sector-specific industrial policies with a focus on streamlining permitting, mandatory application, revenue guarantees for early-stage technologies, government investment in infrastructure and support for ‘innovation..

The majority of business leaders are also (85%) say that greater international coordination is very important for the transition to carbon neutrality, but only a quarter (25%) say it is currently effective.

They highlight the need for deeper and more effective coordination between major economies, particularly regarding harmonized definitions and standards, application mandates, adapted international trade rules and cross-border infrastructure.

Cate Hight, partner at Bain and Company said“Businesses and governments are certainly making progress. The technologies are available and we see strong policies, including standards, subsidies and direct investments, being put in place in some regions; these measures give momentum to the arguments in favor of investment in favor of the energy transition. However, we are not moving fast enough. This year’s barometer sends a clear message from businesses that additional policy support is crucial to establish the market conditions needed to enable a clear business case for adopting low-carbon technologies, on a large scale, during this crucial decade.

The report examines five key obstacles (investment case, infrastructure, technology, supply constraints and customer behavior) and assesses companies’ views on whether conditions are right for the pace and scale required investments. In 11 key sectors, which account for more than 70% of global emissions, including electricity, cement and concrete, steel and shipping, only the battery industry has the conditions to attract sufficient investment and stay on track to achieve net zero emissions targets.

Despite significant obstacles, the report cites a number of positive examples of business investment over the past year, including:

• Steel companies are committing billions to build hydrogen-powered factories to produce low-carbon steel. Planned capacity increased by 150% last year, although this is still not enough to be on track to align with 1.5°C.
• Orders for methanol-powered ships increased by 80% between 2023 and 2024 as shipping companies future-proof their fleets; however, the supply of green fuels is not increasing fast enough.
• Airlines’ use of sustainable aviation fuel is expected to increase 165% between 2023 and 2024, although costs are two to three times higher than conventional fuel and companies are concerned about the limited number of raw materials.

When governments implement more ambitious policy measures, there are clear signs that this accelerates business action, with a number of countries highlighted by businesses as creating the right conditions for investment and market opportunities.

• Companies have doubled their global green hydrogen capacity since 2023 in response to government auctions.
• Upcoming EU mandates requiring the use of sustainable aviation fuel and an increase in clean fuel policies in other markets have increased energy suppliers’ focus on production.
• “EV swing states” like Vietnam, Malaysia and Indonesia are doubling and even quintupling their electric vehicle sales year-over-year thanks to strong local policies coupled with access to financing.
• The tax incentives provided by the Inflation Reduction Act have made the United States an attractive investment location for many sectors, including hydrogen, batteries and chemicals.
• Companies view city-level regulation, such as in Paris, New York and Singapore, as the main driver of low-carbon investments in buildings, due to their faster decision-making capacity, urban planning integrated and their public-private partnerships.

Gonzalo Muñoz, COP25 High Level Champion, shared:“The Barometer highlights immense business opportunities in the transition to net zero emissions. We urge policymakers to act boldly and unlock the full potential of business investment at COP29.

Christiana Figueres, former executive secretary of the UNFCCC, added “The Business Breakthrough Barometer highlights the enormous appetite among businesses to invest in the transition to net zero emissions, as well as the frustration that market structures do not yet effectively reward these investments. As governments approach the deadline to submit improved national climate plans to the UN, it’s a wake-up call for them to include ambitious mandates that will help businesses move faster.