Aerial view of red wooden bridge walkway in a mangrove forest
Aerial view of red wooden bridge walkway in a mangrove forest

How will climate transition planning empower you to shape the future?

The 2024 EY Global Climate Action Barometer finds that despite improved disclosures, companies must take more urgent action on climate.


In brief

  • Despite climate-related disclosure quality (54%) and coverage (94%) increasing, growth does not match the pace needed to avoid the looming climate crisis.
  • While most of the companies are aware of the physical risks they face related to climate change, a mere 19% have adopted plans to mitigate those risks.
  • Only by taking decisive and meaningful action can business accelerate decarbonization and the energy transition necessary to shape a sustainable future.

Despite the existential threat of climate change, companies are not accelerating their transition to net-zero at the rate needed to achieve the goals of the 2015 Paris Agreement. This apparent lack of action has been starkly highlighted by the 2024 EY Global Climate Action Barometer (pdf) (the Barometer), which reveals that less than half (41%) of large companies worldwide have published a transition plan for climate change mitigation even as global temperatures hit new highs.

What’s more, whether they have a transition plan or not, many companies are avoiding long-term commitment to greenhouse gas (GHG) emission reduction targets, with just over half (51%) of companies setting targets beyond 2030.

An already worrying picture becomes even more concerning given the Barometer’s finding that just over one-third (36%) of companies have referenced climate-related financial impact in their financial statements. This is despite 67% having conducted climate-related scenario analysis that shows they likely are aware of the potential threats they might face.

This disconnect between companies’ ambition and action on the decarbonization agenda became more obvious, as the EY teams were carrying out the research for the report. The Barometer - now in its sixth year and previously known as the EY Global Climate Risk Disclosure Barometer - offers an industry standard for gauging global advancements in the breadth and depth of climate-related disclosures. Unfortunately, while a notable improvement in disclosure coverage has been recorded over time, from 61% in the first edition of Barometer in 2018 to 94% in 2024, the quality of these disclosures is not improving at the same rate. Coverage was measured by assigning a percentage score on the basis of the number of Task Force on Climate-related Financial Disclosures (TCFD) recommendations addressed by them. A score of 100% indicated that the company had disclosed some level of information compliant to each of the recommendations, regardless of the quality of information provided. The average score for disclosure quality in 2024 is 54%, up from 31% in 2018. Companies were given a rating based on the quality of the disclosure, expressed as a percentage of the maximum score, should the company implement all 11 recommendations.

There are several reasons why companies choose not to make detailed climate disclosures. They may not want to divulge sensitive commercial information, risk allegations of greenwashing or expose themselves to litigation from stakeholders if they don’t deliver on their strategy. Or maybe, simply, there is no positive story to tell: in other words, they are not taking sufficient action on climate.

Aerial view of the sinuous curves of a scenic mountain road in Fuji-Hakone Izu National Park in autumn, Japan
1

Chapter 1

Sector and market developments

Regulatory developments and stakeholder pressure are driving up disclosure quality in markets and sectors around the world.

Overall, the Barometer suggests a troubling lack of urgency on the part of companies when it comes to taking action that combats the climate crisis. Nevertheless, the research did indicate some progress on climate disclosures, which has largely been driven by regulatory developments.

Leaders and laggards

Improved quality of climate disclosures is noticeable in jurisdictions with strong climate reporting regulations, specifically the UK (which has a quality score of 69%) and the EU overall (which has a quality score of 60%). Companies in the UK and EU are also most likely to have a transition plan. While development in these markets is positive, limited improvement in India, the US and China is worrying given their shares of global emissions: according to the Global Carbon Budget (2023) and Our World in Data organization, China (30.7%), USA (13.6%) and India (7.6%) accounted for 52% of the global annual CO2 emissions in 2022. (CO₂ emissions - Our World in Data).

The Middle East, Southeast Asia and India remain relative laggards on both disclosure quality and coverage compared with other jurisdictions, and although all three markets have seen their reporting quality improve by more than 20% since last year’s study they are still lagging the global average quality score which stands at 54%. Companies are increasingly choosing to report, albeit not at the scale needed, to meet the expectations of stakeholders who want them to act on climate issues and better integrate sustainability into their strategy and operations. For a detailed breakdown by country and markets see the full report.


ISSB readiness

The voluntary standards of the International Sustainability Standards Board (ISSB) are now in effect, and a number of jurisdictions have confirmed they plan to adopt the framework. In turn, the percentage of companies surveyed this year that are disclosing against the recommendations of IFRS S2 Climate-related Disclosures rose markedly.

Governments and the public sector are pivotal in helping businesses transition to sustainable practices and achieve net-zero targets.

The highest average scores for ISSB readiness were secured by Taiwan and the UK (both at 68%), reflecting the speed and decisiveness of those jurisdictions in relation to formal adoption of the ISSB framework.

Sector focus

The Barometer recorded significant year-on-year improvements in disclosure quality in mining, banking and transportation - sectors that are all heavily exposed to transition risk. Yet the highest quality score overall belongs to the energy and insurance sectors (59%). These low scores, however, show that that even the highest-performing sectors fail to deliver at the speed and scale of improvement needed.

Sector

Quality 2023

Quality 2024

Coverage 2023

Coverage 2024

Agriculture, food and forest products**

46%

51%

88%

92%

Banks*

46%

52%

86%

92%

Energy**

55%

59%

95%

96%

Financial asset owners and managers*

40%

41%

80%

84%

Insurance*

55%

59%

93%

96%

Materials and building**

54%

56%

95%

95%

Mining**

51%

58%

93%

99%

Other financial institutions (e.g., Exchanges, other financial services providers, rating agencies and credit bureaus)*

54%

57%

84%

94%

Real estate**

48%

51%

91%

92%

Retail, health and consumer goods**¹

50%

55%

92%

96%

Telecommunications and technology**¹

52%

55%

91%

94%

Transportation**

50%

56%

90%

96%

*Financial Sector **Non-Financial Sector
¹ These sectors are not part of TCFD sector classification, however, were identified as High-Risk sectors by sector leads in 2021 study

Energy’s high score for disclosure quality reflects the sector’s exposure to transition risk as well as its role as an enabler of decarbonization for other sectors. Still, less than half (43%) of the energy companies assessed for the Barometer had disclosed a transition plan, possibly for competitiveness-related reasons, while just 24% disclosed the quantifiable impacts of climate on their business.


Sempra

One of the top performers in the Energy Sector on quality* (score: 44)

Sempra Energy's vision is of a future increasingly resilient to the impact of severe weather, and where businesses and people of all ages and backgrounds thrive with access to secure, affordable and cleaner energy. The company's sustainability approach is rooted in extensive stakeholder dialogue and deep enterprise-wide alignment around ambitious goals, all championed at the highest levels of the organization. Sempra aims to increase the use of renewable energy sources and improve energy efficiency across its operations, and is focusing on water conservation and waste reduction to minimize its environmental impact.

In terms of social responsibility, Sempra is dedicated to supporting the communities where it operates. This includes initiatives to promote education, economic development, and health and safety. The company also emphasizes diversity, equity, and inclusion within its workforce and strives to create a positive and inclusive work environment.

Governance is another key aspect of Sempra's sustainability strategy. The company is committed to maintaining high ethical standards and transparency in its business practices. This includes robust risk management and compliance programs to ensure accountability and integrity in all its operations.

*According to the Barometer research


The insurance sector’s healthy quality score reflects several factors: the rise of mandatory climate reporting; pressure from investors who expect the insurance companies to provide more  transparent, robust and detailed disclosures around their climate-related metrics; and, as corporate clients improve the quality of their disclosures, the availability of higher-quality data that banks and insurers can use to inform their decision-making and improve their own disclosures. However, banks and insurers are less likely than many other sectors to produce a transition plan. The Barometer found that 37% of banks and 36% of insurers had a transition plan, lower than the cross-sector score of 41%.


Lloyds Banking Group plc

One of the top performers in the Financial Sector on quality* (Score: 44)

Lloyds Banking Group has positioned itself as a proactive leader in the journey towards a more sustainable and inclusive future, underpinning its corporate purpose of Helping Britain Prosper with tangible commitments and actions. Central to its strategy is the ambitious goal to significantly reduce the carbon emissions it finances by more than 50% by 2030, aiming for net-zero by 2050 or sooner. This commitment extends to halving the carbon footprint of its investments by the same deadline, alongside a pledge to slash its supply chain emissions by 50% and achieve net zero operations by 2030, with a notable target of reducing its direct carbon emissions by at least 90%. These targets underscore Lloyds Banking Group's dedication to not only mitigating its environmental impact but also fostering a greener, more resilient economy. The Group also has a transition plan in place.

Beyond its internal sustainability measures, Lloyds Banking Group emphasizes the power of collaboration in amplifying its impact. As a founding member of the Net Zero Banking Alliance and an active participant in the Financial Services Taskforce, the group leverages its influence and resources to drive broader industry shifts towards sustainability. Moreover, they’ve recently collaborated with the UK Soil Association Exchange, helping to conduct one of the most comprehensive review of farm environmental performance carried out in the UK. The report has resulted in over 4,000 bespoke recommendations to almost 700 farmers across the UK.

*According to the Barometer research


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2

Chapter 2

Financial impact of climate change

Companies are reluctant to reflect the impacts of climate-related risks in their financial statements.

This year’s Barometer highlights that companies have only made limited progress on referencing climate-related financial impact in their financial statements. Just 36% of companies surveyed have done so - an incremental increase on last year’s figure of 33%.
 

The lack of progress in this area should be a cause for alarm. Analysis conducted for the Barometer reveals that the average GDP for the 51 countries assessed is expected to decrease by 35% by 2100 if no further climate action is taken.
 

Only 17% of companies in the Americas report that climate risk could have a potentially high financial impact on their business. This is despite the US and Canada being among the economies with the highest risk of negative impact on GDP due to climate change. Notable examples include the 2021 Texas winter storm, which inflicted widespread damage in Texas, leading to power and water supply disruptions. The estimated cost of this event is around US $195 billion. In the same year, the Californian wildfires resulted in approximately US $10 billion in damages. Despite these events, many companies are still holding back from connecting climate risk with financial impact potentially as a result of differing time horizons. Typically, companies plan financially for three to five years ahead, while climate risks may not become apparent until much later. Another issue could be that companies are not effectively identifying risks due to inadequate scenario analysis.
 

Regardless of the reason, companies cannot afford to overlook the potential financial impact of climate risk on their business over the medium to long term. They could use their transition plans to explain how their business model is likely to be affected by the shift to a net-zero economy. 


Top down view of a tree lit up be arrows pointing all around it
3

Chapter 3

The pathway to sustainability

Transition planning and target-setting is not at the scale to facilitate decarbonization and prevent the worst impacts of climate change.

The level of transition planning being undertaken by companies highlights their struggles to identify decarbonization levers and commit to the action plans needed to achieve their climate goals. Just 41% of companies assessed this year said they had a transition plan, while 21% do not yet have a plan but have disclosed ambitions to put one in place.

Perhaps expectedly, companies that do have transition plans generally have a higher quality of climate disclosures.

Companies’ lack of action on transition is incongruent with the scale of their ambition on the climate agenda. Analysis of disclosures in relation to transition planning shows that the vast majority of the companies assessed (83%) have set short-term targets, aiming to achieve those targets by 2030.

Transition planning: a regional snapshot

Transition planning: a sector snapshot


The importance of setting a target

Targets are critical for accelerating the transition to a net-zero economy. When companies set targets, they are indicating that they intend to take strong climate action that is aligned with achieving the goals of the 2015 Paris Agreement and limiting global warming to 1.5°C above pre-industrial levels. Targets that have been validated by the Science Based Targets initiative (SBTi) are considered best practice because they set specific timelines for the rate at which companies must decarbonize to prevent the worst impacts of climate change.

Notably, just 24% of companies assessed for the Barometer have their short- and long-term targets validated by the SBTi, although this figure climbs to 41% of companies with an established transition plan. Companies could therefore do much more to align their target-setting with the science around climate change.

Overall, 78% of the companies assessed disclosed the scope of emissions considered in their targets. Half (50%) considered all three Scopes in their targets while 21% considered Scopes 1 and 2 only. In terms of their decarbonization strategies, companies are prioritizing reductions in Scope 2 emissions. Many of these reductions relate to reducing electricity consumption but the majority are indirect impacts through purchasing renewable energy via power purchase agreements or renewable energy certificates. The Barometer shows that companies are investing less in initiatives targeted at Scope 1 and Scope 3 emissions. This is a concern since Scope 3 emissions often represent the majority of an organization's total greenhouse gas emissions, and reductions in these emissions are essential for companies to genuinely decarbonize their business models.


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4

Chapter 4

What’s next?

Although companies face real challenges around the net-zero transition, they can take six core actions to accelerate change.

The Barometer shows that despite improved levels of climate disclosures across the markets and sectors, even companies with ambitious targets approved by the SBTi do not have detailed strategies to reach the target goals and develop transition plans that drive real-world action. Certainly, they face some genuine barriers to transition, including the pressure to balance profitability with achieving their carbon ambitions, practical challenges in addressing Scope 1 and Scope 3 emissions, and the unavailability and expense of low-carbon technology. Nevertheless, the transition to a net-zero economy will likely not happen without ambitious and meaningful action.

Companies should take these six core actions to accelerate their sustainability transition and shape the future:

  1. Move transition to the core of the business agenda by developing a robust, actionable plan. This should be founded on science-based targets and outline clear short- and long-term targets for Scope 1, 2 and 3 emissions. It should be informed by robust scenario analysis and feature a clear decarbonization strategy for the supply chain.

  2. Reflect climate risk in the financial statements and explore potential opportunities. Companies should adopt quantitative analysis to measure the risks and opportunities associated with climate change, ensuring a direct connection to financial reporting. As well as quantifying the financial risk associated with climate transition, companies should explore potential opportunities such as new business models, a shift to new ways of working, or access to grants and incentives.

  3. Use data to drive action. By capturing the right data in the right way, companies can use their sustainability information to inform real-time decision-making. For example, if companies are reporting comprehensively on the TCFD pillars, they can use the information to better prepare themselves for future climate challenges. Likewise, reporting on GHG emissions can help them in setting a target to reach net zero, and disclosing on strategy pillars can help them in devising ways to mitigate climate risks, plus putting a proper governance structure in place can help in embedding climate policies within an organization, etc.  This will enable companies to better anticipate and respond to market risks and opportunities.

  4. Provide the sustainability team with sufficient resources. The sustainability team needs the capacity to manage compliance while also leading on overall sustainability strategy and undertaking thoughtful work in vital areas such as climate risk analysis. Equally crucial is the strategic alignment, which can be achieved by positioning the sustainability function under the chief financial officer (CFO) or making sure that sustainability is embedded in each role within different business units.

  5. Equip board members with the skills to understand and consider climate risk as part of a top-down approach. This can be achieved through training and education and by recruiting board members with specialist knowledge. Companies also need to link sustainability performance with executive compensation to incentivize executives to prioritize and achieve their climate-related goals, integrating them into strategic decision-making and daily operations. The 2023 EY Sustainable Value Study highlights how boards can drive delivery on sustainability ambitions by focusing on the dynamics of key executive roles and five strategic areas.

  6. Explore cross-sector collaboration. By looking outside of their immediate ecosystems of suppliers and partners, businesses can create value in often unique ways, benefiting multiple stakeholders. As governments and the public sector are essential in driving progress towards net-zero targets, businesses could proactively align with regulatory frameworks, engage in public-private partnerships, promote transparency in monitoring and advocate for sustainable policies.

2024 EY Global Climate Action Barometer

To better understand why businesses need to shift from a commitment to an action mindset, take a look at the full report.

Summary

The sixth edition of the 2024 EY Global Climate Action Barometer clearly shows that the state of climate-related disclosures is nowhere near where it needs to be to effectively address the accelerating climate crisis. Companies across the world need to urgently improve the quality of their climate disclosures. In particular, they must increase their adoption of transition plans, better connect the results of their scenario analysis with their financial information, and set scientifically validated targets for the short, medium, and long term.

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