Accounting for decarbonisation and reducing capital at risk in the S&P500

•Carbon emissions in the S&P500 for the period 2008 to 2014 have not been reduced.Fig. 1S&P 313 Business Models: Carbon Generating and Carbon dependent business models.Notes: the shares of carbon emissions are the average for all companies in these business models covering the period 2008–2014Source: AuthorsFig. 2S&P 313 Business Models: Carbon intensity and capital employed.Notes: the shares of carbon emissions are the average for all companies in these business models covering the period 2008–2014. Capital employed is: Short and Long-run debt plus total shareholder equity which is paid in capital, additional capital paid in and retained earnings reserves after adjustments for changes in comprehensive income.Source: AuthorsChart 1Trading price of carbon on European ETS.Source: MacDonald (2016)Chart 2CO2 emissions: China, US and European Union 1960–2014 (bill tons).Source: The World Bank (2018)Chart 3Energy and Digital Lifestyle Business Model: Market Value Index.Source: Thomson Reuters and Author datasets•Carbon intensive business models present a threat to financial stability from ‘stranded assets’ and ‘carbon bubbles’.•Financial institutions should migrate investment portfolios away from carbon intensive business models.•Carbon intensive business models are conjoined to less carbon intensive business models which generate substantial financial leverage.This article accounts for carbon emissions in the S&P 500 and explores the extent to which capital is at risk from decarbonising value chains. At a global level it is proving difficult to decouple carbon emissions from GDP growth. Top-down legal and regulatory arrangements envisaged by the Kyoto Protocol are practically redundant given inconsistent political commitment to mitigating global climate change and promoting sustainability. The United Nations Environment Programme (UNEP) and European Commission (EC) are promoting the role of financial markets and financial institutions as drivers of behavioural change mobilising capital allocations to decarbonise corporate activity.