Climate transition plans lack depth despite net-zero pledges: EY

Inaction on climate risks could cost businesses up to 15% of annual revenue.

Many of the world’s biggest companies still lack climate transition plans strong enough to support global net-zero goals, according to the EY Global Climate Action Barometer.

The report, which reviewed 857 companies across 50 countries and 13 sectors, found that 64% of businesses have net-zero transition plans. However, only 12% have made strong progress in developing or disclosing those plans.

EY said less than half, or 48%, have targets aligned with scientific guidance on mitigating the worst effects of global warming.

Among companies with net-zero targets, 63% rely on carbon credits, meaning many are offsetting emissions rather than directly decarbonising. Reliance on carbon credits was highest in financial services at 78% and transportation at 69%.

The report also found that 34% of businesses have restated their climate targets due to factors such as reduced funding or regulatory uncertainty. Of these, 44% were weakened through delayed timelines or less ambitious targets.

Whilst 68% of companies have assessed both transition and physical climate risks, only 17% report the financial impact of these risks.

EY also said governance gaps remain. Only 8% of companies have board oversight over capital allocation, 21% over target setting, and 41% over progress monitoring.

A separate EY analysis found that failure to address climate risks could cost businesses up to 15% of annual revenue.

In Southeast Asia, EY said companies face similar challenges, including the absence of detailed transition plans, high upfront decarbonisation costs, policy uncertainty, technological constraints, and limited investment-grade data.

Praveen Tekchandani, EY Asean coleader and Singapore leader for climate change and sustainability services, said corporate leaders should treat climate transition as a business strategy issue rather than a compliance-driven agenda.