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Firm climate investment: A glass half-full

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  • Srivastava, Prachi
  • Bloom, Nicholas
  • Bunn, Philip
  • Mizen, Paul
  • Thwaites, Gregory
  • Yotzov, Ivan

Abstract

The green transition will require large investments from firms, yet little is known about the scale and drivers of climate-related capital expenditure across the UK economy. To address this gap, we draw on a large, representative survey of UK firms to quantify how businesses expect to adjust their medium-term investment in response to climate change. Over 2023-2026, firms expect climate-related investments to account for 5.5% of total capital expenditure. These investments will be driven by larger firms as well as those in more energy-intensive sectors. The main channels for these investments are switching to green energy sources and improving energy efficiency, and firms plan to finance them primarily using internal cash reserves. Overall, although firms are expecting to invest more resources in adapting to climate change, under reasonable assumptions, these investments are still not sufficient to meet the estimated targets implied by the UK Net Zero Pathway.

Suggested Citation

  • Srivastava, Prachi & Bloom, Nicholas & Bunn, Philip & Mizen, Paul & Thwaites, Gregory & Yotzov, Ivan, 2026. "Firm climate investment: A glass half-full," Energy Economics, Elsevier, vol. 154(C).
    • Handle: RePEc:eee:eneeco:v:154:y:2026:i:c:s0140988325009272
    DOI: 10.1016/j.eneco.2025.109097
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    Cited by:

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    2. Svetlana Popova & Natalia Turdyeva, 2024. "Environmental and Climate Factors of Corporate Lending in Russia," Bank of Russia Working Paper Series wps143, Bank of Russia.

    More about this item

    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D25 - Microeconomics - - Production and Organizations - - - Intertemporal Firm Choice: Investment, Capacity, and Financing
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • C83 - Mathematical and Quantitative Methods - - Data Collection and Data Estimation Methodology; Computer Programs - - - Survey Methods; Sampling Methods

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