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Money talks. The $369 Billion package of climate and clean energy stimulus included in the 2022 Inflation Reduction Act (IRA) was a powerful shot in the arm that resuscitated decades of inaction by the United States on climate.
In a sharply divided and polarized government, the IRA showed the power of aligning massive capital flows in the fight against climate change. We are already seeing the ripple effects of this financial investment in the form of more solar and renewable energy on our homes and electric grid, a wider selection of electric vehicles, and faster action to repair leaky methane pipes.
Yet despite the IRA’s success, the world remains woefully underinvested in climate solutions. Global greenhouse gas emissions continue to rise and the increased frequency of extreme weather events offer a stark reminder that climate change is here, and containing it must be an urgent priority.
Now is the time to unlock billions more in corporate climate investment. In recent years, many companies have rolled out ambitious-sounding net-zero climate goals. The next wave of investment will stem from companies backing up those goals with capital to reduce emissions within their operations, within their supply chain, and through third-party projects. At a time when the corporate sector is sitting on record levels of cash, this investment will fulfill pledges that companies have made to their customers, employees, and the world.
Failing to make good on these pledges would be a massive and irresponsible violation of the promise of corporate social responsibility programs.
Companies need to ramp up their financial contribution to climate solutions, spend those funds on the right things, and publicly disclose this capital allocation to stakeholders.
So that begs the question: how should each company determine its next steps? What level of investment is needed to decarbonize? The simplest answer is that companies should invest in proportion to their emissions. The larger the emissions, the bigger the investment.
Internal carbon pricing has been adopted by many companies and provides a direct way to link investment to emissions. Microsoft, for example, “charges” internal business units a fee for each ton of greenhouse gas that they generate. Those funds then drive sustainability investments for the company that reduce emissions.
Recognizing the power of this direct and simple mechanism, in 2023 The Change Climate Project decided to adjust future certification requirements so that companies would be required to adopt a price on emissions and demonstrate how they are investing in the climate transition.
With this evolution in our Standard, our aim is to drive investment into a targeted list of activities both within and outside supply chains in clean energy, low carbon materials, GHG capture technology, and the personnel and R&D work needed to make the low carbon future a reality. Companies, particularly, those that have fewer supply chain reduction options, will also be encouraged to invest in market-traded instruments such as carbon credits, market transformation coalitions, lobbying, and actions to advance climate justice.
Critically, the updated Standard will require companies to publicly disclose climate spending. This ensures that a company’s expenditures match their public climate commitments.
The next big wave of corporate climate investment is close on the horizon, and TCCP is excited to be driving it forward with this evolution of our Standard and trusted climate label. Join us: as a certified brand, a supporter, or a member of our community.
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Our partnerships leader, Greg brings nearly two decades of nonprofit experience working on corporate, consumer, and policy solutions to the climate crisis. He loves to find opportunities for uncommon bedfellows to work together to protect the environment. Greg and his family can be found exploring the mountains and coast in North Carolina and searching out epic wilderness areas in Argentina.
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