Financial Rewards from Climate Action: The Logic Behind Making Environmentally Friendly Choices as a Business Strategy
In a groundbreaking development, companies investing in climate risk mitigation could see up to $21 in return for every dollar spent, making climate action a growth engine rather than a cost center. This revelation, part of CDP's latest report, "The 2025 Disclosure Dividend," highlights the financial benefits of embracing sustainable practices.
In 2024 alone, a combined $4.4 trillion in financial value was unlocked by companies acting on climate-related opportunities. This trend is expected to continue, with $13.2 trillion in untapped opportunities remaining.
The European Central Bank has announced plans to adjust the value of corporate bonds used as collateral in its refinancing operations based on climate vulnerability, starting from the second half of 2026. This move aims to safeguard against future shocks and encourage banks to shift towards more sustainable investments.
However, not all companies are seizing these opportunities. Small and Medium Enterprises (SMEs) and Global South companies face additional hurdles, such as restricted access to transition finance, lack of technical support, or insufficient regulatory clarity.
The top climate-related opportunities reported by companies worldwide include low-carbon technologies, renewable energy investments, carbon capture, and AI efficiency improvements. These opportunities can offer substantial financial gains, with companies seeing an average return on investment (ROI) of about 7 times their cost, and in some cases, up to 21 times returns on risk mitigation spent.
Renewable energy and low-carbon solutions, such as those pursued by Allianz, are proving to be particularly profitable. Allianz's investments in solar, wind, and battery manufacturing contributed to a 25% revenue growth in low-carbon insurance solutions, and sustainable investments of over €170 billion, with more than €43 billion specifically allocated to low-carbon projects.
Carbon capture and storage (CCS) is also viewed as a near-term strategic option, especially for powering energy-intensive sectors like AI data centers. Managing AI's operational and embodied emissions has become critical, with companies innovating in emissions accounting and low-carbon energy procurement, addressing both climate impact and social equity.
Environmental opportunity values varied dramatically by geography. Japan and Canada lead with median values of $73 million and $72 million per company, while the U.S. and China come in at $15 million and $10 million, respectively.
Companies that act on climate-related opportunities can see up to 21 times return on investment (ROI) in resilience. However, more than 64% of companies identified environmental opportunities in 2024, but only 12% acted and reported measurable financial gains.
The reasons for slow action include short-term shareholder pressure, limited capacity to manage climate data, and fear of revealing vulnerabilities. Only fewer than half of large firms disclosing environmental risks and opportunities have a credible climate transition plan.
The real gap in action is in governance and leadership, aligning CFOs, sustainability leads, and capital allocators, and moving beyond incrementalism to recognize climate resilience as a driver of long-term value. Companies not yet acting risk leaving $13.2 trillion in opportunities unrealised.
By integrating climate risk into its collateral framework, the European Central Bank aims to weave climate risk into the architecture of global finance, with financial institutions responding with new tools and policies. Environmental risk is financial risk, and boards and CFOs must shift from viewing environmental data as compliance to treating it as capital strategy.
Sustainable products are outperforming peers by up to 25% in revenue. Companies tackling Scope 3 emissions have saved $13 billion, with $165 billion more achievable at a cost of just $94 billion.
In conclusion, the financial benefits of climate action are undeniable. Companies that embrace sustainable practices not only mitigate risks but also unlock significant business opportunities with substantial returns. The time for action is now.
- The financial benefits of addressing climate-related opportunities are evident, as companies can see up to $21 in return for every dollar spent on climate risk mitigation, making it a potential growth engine rather than a cost center. (return on investment, climate risk, growth engine)
- Embracing renewable energy and low-carbon solutions can offer substantial financial gains, with an average return on investment (ROI) of about 7 times their cost, and in some cases, up to 21 times returns on risk mitigation spent. (renewable energy, low-carbon solutions, ROI)
- By integrating climate risk into its collateral framework, the European Central Bank aims to weave climate risk into the architecture of global finance, encouraging financial institutions to respond with new tools and policies that treat environmental data as a capital strategy. (climate risk, collateral framework, capital strategy)
