Note: The base is all firms (data not shown for those who said don’t know/refused to answer).
Question: Has your company already invested to tackle the impacts of weather events and reduction in carbon emissions?
Source: EIBIS 2020
Around 45% of EU firms report investments to address climate change, compared to 32% of firms in the United States. Western and Northern Europe saw the largest share of firms investing in these measures, at 50%. The share in Southern Europe is 38% and in Central and Eastern Europe 32%. At the country level, the differences are even more pronounced: Finnish (62%) and Dutch (58%) firms are at the forefront of climate investments, whereas only 23% of Cypriot, 19% of Irish and 18% of Greek firms make this kind of investment.
When it comes to specific investments in climate change, the push towards energy efficiency continues. Nearly half of firms in the European Union have invested in energy efficiency, rising by ten percentage points to 47% in 2020. This is slightly lower than the 50% of firms that invested in energy efficiency in the United States, which saw a similar jump from 2019. Firms in Western and Northern Europe invest the most (48%), followed by Southern, Central and Eastern Europe, standing at around 40%. Despite higher energy efficiency investments than in the previous year, Europe’s energy savings potential remains largely untapped given the energy and non-energy benefits that these entail.
Physical climate risks are becoming a reality for firms
Firms face two main types of climate-related risks: direct physical risks and transition risks that arise from society’s response to climate change. Physical risks are easier to observe and for firms to understand, as they emerge from exposure to acute events or chronic transformation. Transition risks are less evident, as they depend on global decarbonisation commitments.
Almost 60% of European firms report vulnerability to physical risks compared to 50% in the United States. In summer 2020, firms were asked if physical risks had impacted their business. Southern EU countries are likely to report higher physical risks for firms’ operations than other regions. This is followed by firms in Central and Eastern Europe, reporting a higher vulnerability to physical climate risks than firms in Western and Northern Europe. This relatively higher perception of physical risk, particularly in Southern Europe, may be due to the rising threat of drought, limiting food production and potentially disrupting tourism in the area.
Barriers to climate-related investments: Uncertainty about regulation and taxation cited as the biggest threat
Uncertainty about regulation and taxation and investment costs are the biggest constraints to climate-related investments in the European Union, where the most frequently cited obstacle is uncertainty about regulation and taxation (43%), followed by investment costs (41%). Uncertainty about regulation can delay or cancel investment decisions, as firms try to have the full picture of expected cost benefits before an investment.
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