Capital Flows and Net Zero Credibility Analysis

This technical report examines the relationship between capital expenditure (capex) and the credibility of low carbon transitions in alignment with net zero targets. It outlines how current capex allocations are misaligned with necessary greenhouse gas (GHG) emissions reductions to meet the Paris Agreement goals, indicating a potential increase in global temperatures beyond acceptable limits. The report highlights a significant scaling gap in transition initiatives, particularly in the Utilities sector, where the majority of investments still favor fossil assets. It discusses the implications of capital allocation decisions on real-world climate outcomes and emphasizes the need for transparency in long-term capex disclosures. Furthermore, it addresses the importance of aligning corporate transition strategies with funded plans to ensure effective decarbonization efforts. The findings suggest that while there is an increase in low carbon investment, the overall trajectory remains insufficient to achieve the necessary emissions reductions for limiting global warming.