Most of the investments needed will come from the private sector. Companies will invest only if the business case is robust enough and risk-adjusted returns can be earned over time. Governments and other relevant actors can play an important role in de-risking investments through targeted policies and blended financing, especially for “first-of-its- kind” applications of key technologies in hard-to- abate sectors. Additionally, to further help developing countries raise capital, strategies such as increasing concessional capital from institutions, expanding private investment through tools like blended finance and risk mitigation, and enhancing domestic financial markets and tax systems have emerged. Additional approaches include sovereign debt restructuring, carbon market development and improved risk frameworks.76 Developed countries also have a role to play, by providing concessional finance, supporting risk-reducing instruments and promoting global climate finance initiatives. An example of such collaboration is Pentagreen Capital, launched by HSBC and Temasek, aimed at mobilizing over $1 billion for sustainable infrastructure in South-East Asia. Their financing of solar and bioenergy projects exemplifies how developed countries can provide essential capital and expertise to stimulate private sector investment in developing nations.77 While the costs of these initiatives may be significant, companies can offset some of these expenses by generating returns from decarbonization initiatives across multiple value levers. –New markets: To increase profits, companies can use their core businesses to tap into new markets. For example, Maersk is actively developing both the supply and demand for green shipping fuels. By investing in a green ammonia facility with Danish logistics group DFDS and establishing a green methanol company, Maersk aligns its operations with carbon reduction goals while positioning itself to capture market share in a growing sector.78 –Premium pricing: Companies that identify opportunities for greener products can command premium prices, as green premiums are becoming more prevalent across various commodities. These premiums can offer added value to consumers by supporting sustainable choices, allowing companies to maintain industry margins with moderate adjustments in consumer prices. Economic factors, including inflation and rising living costs, are influencing the supply-demand balance in these markets. For instance, high-quality recycled plastics have achieved an average premium of up to 60% over virgin plastics in recent years. Similarly, low-CO2 steel is expected to command significant premiums by 2030.79 –Energy and material expense reduction: Companies that manage to reduce both their costs and carbon emissions can gain a bigger share of the market and save money for future projects aimed at reducing their environmental impact. Many industry leaders focus on cutting down their emissions by 20-40%. At the same time, they work on lowering their costs, which leads to higher profits.80 –Enhanced branding: Decarbonization enhances a company’s brand reputation, cultivating trust and loyalty among environmentally conscious consumers while differentiating it in the marketplace. By adopting transparent and genuine green practices, companies improve brand perception and customer loyalty, which can lead to increased sales and profitability. While the costs of these initiatives may be significant, companies can offset some of these expenses by generating returns from decarbonization initiatives across multiple value levers. Net-Zero Industry Tracker: 2024 Edition 35

Net Zero Industry Tracker 2024