Banks, insurers, private equity and investment managers are driving a spending boom in carbon management as they gear up to meet regulatory standards, a new report from leading independent research and advisory firm Verdantix forecasts (please see the attached press relesae .
It predicts global spending on carbon management software across the finance industry will rise fivefold to $256 million by 2027 compared with just $51 million in 2021 as companies increasingly adopt Task Force on Climate-Related Disclosures (TCFD) regulations.
Financial services businesses need specialist software to track data and estimate Scope 3 carbon emissions stemming from their portfolio firms. The 2022 TCFD status report found 43% of financial institutions interviewed rated Scope 3 GHG emissions as a ‘very difficult’ recommended disclosure.
The compound annual growth rate among financial companies is estimated by Verdantix as 31% until 2027 while its Market Size And Forecast: Carbon Management Software 2021-2027 (Global) report forecasts the total market will grow at an annual rate of 28% to hit $1.49 billion by 2027.
Verdantix predicts that the EMEA region will be the fastest-growing and it will overtake North America as the biggest global market by 2025 and will be worth more than $650 million two years later.
North America will still grow strongly but Verdantix estimates SEC climate disclosure rules announced in March 2022 will not come into effect until 2025 for major quoted firms worth more than $700 million and 2026 for smaller publicly traded companies.
Technology, media and telecommunications firms’ spending on carbon management software is expected to grow strongly as well, mainly driven by net zero pledges and competitive pressures. Industries with fossil-fuel-intrinsic emissions and hard-to-abate emissions will grow more slowly.