The world is not on track to hit the Paris Agreement targets and warming could exceed 1.5°C as early as 2040 with huge potential implications for business, according to new research by Zurich Insurance.

The new research by Zurich Insurance and research agency Horizon Group – Accelerating the climate transition: long-term thinking for near-term action – explores areas where the climate transition can be accelerated and is based on the sustainability executives survey of 668 executives who have responsibilities related to sustainability within their companies.

The research shows that companies across sectors are committed to net-zero and are already pushing ahead with the delivery of transition plans in the short-term, but reveals the considerable challenges they are facing on that journey. The most important barrier to developing a net-zero plan – named by 50% of companies overall – is costs and scale of capital expenditure. This is closely followed by: lack of feasible technological solutions; regulatory challenges; and difficulties in measuring and monitoring impact.

Matt Holmes, group head of political and government affairs at Zurich, said: “Policymakers can support businesses’ climate transition by making systemic, economy-wide interventions, such as carbon-pricing mechanisms, that can harness the power of capital markets and incentivize innovation and decarbonisation at scale. The discussion so far suggests three priorities for action for governments: creating policy certainty, facilitating investment in mitigation and adaptation, and turbo charging innovation.”

The report also found that 77% of companies have an active net-zero transition plan. The transport sector is behind other industries with only 37% of companies having a net-zero plan. 85% of companies intend to implement climate adaptation measures within the next five years – heavy manufacturing is moving at the fastest pace in terms of adaptation; agriculture the slowest.

Risks associated with climate change are growing accordingly, says Lars Henneberg, VP, head of risk management at A.P. Moller-Maersk, said: “The average cost of physical damage and business interruption due to climate change hazards is expected to increase by 130% by 2050, compared to a 2020 baseline.”

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