The transition to a low-carbon economy is often framed through commitments: net-zero targets, transition plans, and long-term strategies. However, the pace and credibility of this transition ultimately depend on how capital is allocated.
Capital expenditure (CapEx) provides one of the most tangible indicators of corporate transition progress. Unlike climate targets or transition plans, CapEx reflects actual financial decisions, where companies are investing today to reshape their business models.
Yet despite its growing importance, fewer than half of the world’s highest-emitting companies currently disclose their green CapEx, according to Clarity AI’s analysis of high-impact sectors1. This lack of transparency makes it difficult for investors to distinguish between companies that are meaningfully investing in the transition and those that are not. As a result, a critical blind spot is emerging in how the transition is assessed.
In a context of intensifying geopolitical tensions, this lack of visibility becomes even more critical. Green investments are increasingly tied to energy security and industrial resilience, as countries seek to reduce dependencies on foreign energy and raw materials.
The growing role of green CapEx
The importance of capital allocation is increasingly reflected in investor frameworks. The Net Zero Investment Framework (NZIF) 2.0, a leading global standard for investor transition planning, now mandates capital allocation evaluation, elevating it from a secondary to a core criterion.
The framework requires investors to verify that a high-impact company’s capital expenditure aligns with science-based transition pathways for it to be deemed “Aligned to a net zero pathway” or “Achieving Net Zero.”
Figure: NZIF 2.0 criteria underpinning alignment assessment of corporate issuers
Key
Green ticks represent when a criterion is required to be fulfilled for a particular alignment category to be obtained.
Criteria
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Asset with emissions intensity required by the sector and regional pathway for 2050 and whose operational model will maintain this performance.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Emissions performance: Current absolute or emissions intensity is at least equal to a relevant net zero pathway.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
*Capital allocation alignment: A clear demonstration that capital expenditures are consistent with a relevant net zero pathway.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
*Decarbonisation plan: A quantified set of measures exists to achieve short and medium term science-based targets by reducing GHGs and increasing green revenues, when relevant.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Disclosure: Disclosure of operational scope 1, 2 and material scope 3 emissions.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Targets: Short and medium term science-based targets to reduce GHG emissions.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
Ambition: A long term goal consistent with the global goal of achieving net zero by 2050.
Committed to aligning
Aligning to a net zero pathway
Aligned to a net zero pathway
Achieving net zero
*Additional alignment criteria that a corporate within a high impact material sector needs to meet.
Source: Institutional Investors Group on Climate Change (IIGCC), June 2024
At the same time, disclosure requirements are evolving. While the EU Taxonomy remains the benchmark—even as it undergoes streamlining via the omnibus procedure—new frameworks are emerging in jurisdictions such as Canada and Brazil. For institutional investors, the ability to interpret and compare these disclosures is becoming a critical risk management capability.
For investors, the challenge is no longer just access to data, but the ability to interpret what capital allocation actually signals about transition credibility.
The green CapEx disclosure gap
Despite the growing importance of capital allocation, disclosure of green CapEx remains limited. As mentioned, fewer than 50% of the world’s highest-emitting companies currently report green CapEx. This lack of transparency is particularly pronounced outside Europe, where disclosure rates drop to around 30%.
To assess green CapEx consistently across companies, Clarity AI has developed a structured methodology that identifies and classifies capital expenditure linked to sector-specific decarbonisation levers—such as EV production, grid modernisation, hydrogen production, and electric arc furnace steelmaking—and benchmarks these investments against sector-relevant thresholds.
The analysis is based on the Green Capital Expenditure (CapEx) Ratio, which measures the share of total capital expenditure dedicated to climate-mitigation efforts. This approach draws on publicly disclosed data, including EU Taxonomy reporting, and is applied across a broad universe of high-impact companies globally, with detailed analysis based on those currently disclosing green CapEx data.
Among companies in the MSCI ACWI index that currently disclose green CapEx data (232 companies), a clear geographic divide emerges. European companies, driven by EU Taxonomy requirements, lead in disclosure, while North America and Asia lag significantly.
However, higher disclosure does not necessarily translate into stronger investment. Companies in EU-27 countries and the rest of Europe report relatively low green CapEx ratios—23% and 21% on average—both in absolute terms and compared to reporting peers in other regions (see Figure 1). This suggests that disclosure alone is not a reliable signal of transition progress.
Even in markets with more mature sustainability practices, investors may struggle to identify companies making meaningful transition investments. Conversely, the relatively stronger performance observed in other regions is likely influenced by survivorship bias, as only the better-performing companies tend to disclose under voluntary regimes.
A sector-by-sector divergence in investment
A sectoral breakdown of green CapEx reveals a clear divide in how industries are allocating capital toward the transition.
Airlines (71%) and electric utilities (46%) show relatively high green CapEx ratios. In contrast, marine shipping and auto manufacturing remain below 30%, while most heavy industries—including steel, cement, and oil & gas—allocate less than 10% of capital expenditure to low-carbon activities (see Figure 2).
This highlights a critical reality: in many of the sectors most central to the transition, the vast majority of capital is still directed toward maintaining high-carbon operations.
The relatively high ratios observed in the airline sector require a more nuanced interpretation. In our analysis, fleet renewal is classified as green CapEx, as newer aircraft are typically more fuel-efficient than older models. However, deeper decarbonisation investments—such as sustainable aviation fuel (SAF) infrastructure—still account for a comparatively small share of capital allocation.
In electric utilities, by contrast, green CapEx is more directly linked to structural change. A significant share of investment is being directed toward renewable generation, grid modernisation, and energy storage systems, likely driven by the increased cost-efficiency of low-carbon energy technologies and the escalating need for more robust grids to support industrial electrification.
Benchmarking green CapEx: How much is sufficient?
For investors, one of the central challenges is not just measuring green CapEx, but determining what level of investment is sufficient.
Clear, science-based benchmarks are typically missing across high-impact sectors. The Accessing Low Carbon transition (ACT) methodologies offer science-based guidance for electric utilities and oil & gas, setting thresholds at 95%. In practice, only 14 electric utility companies (17%) of our sample meet this high level, while, unsurprisingly, no oil & gas company does.
This gap between theoretical alignment and real-world investment highlights how far most sectors still have to go.
In the absence of external standards, a “best-in-class” approach offers a practical alternative. Using the top quartile within each sector as a reference point highlights what is currently achievable under real-world constraints, such as technology availability and cost-efficiency.
This comparison reveals a consistent pattern: a wide gap between leaders and the rest of the market. The disparity is particularly pronounced in cement, steel, aluminum, oil & gas, and electric utilities, where average green CapEx levels remain well below those of top performers (see Figure 2). Even among leading companies, green CapEx ratios vary widely across sectors.
By contrast, transport sectors show more consistent investment patterns, with industry averages closer to top performers. This suggests that capital allocation toward the transition is becoming more embedded in these sectors, particularly through investments in fuel-efficient fleets and electric vehicle production.
Top-performing companies within each sector are already allocating significant capital to the transition, illustrating what is currently achievable, but also how far the rest of the market still lags:
| Company | Industry | 2025 reported investments | Green CapEx Ratio |
| Nextera Energy Inc | Electric Utilities | Invested 4,355 M USD into wind energy projects, 7,327 M USD into solar, 2,213 M USD into “Other clean energy” and 344 M USD into Nuclear. | >95% |
| EDP Renovaveis SA | Electric Utilities | Invested 3,242 M EUR into the production of electricity from wind and photovoltaic solar power(EU Taxonomy aligned). | >95% |
| Enel SpA | Electric Utilities | Invested 9,588 M EUR into the production of electricity from wind, hydropower, geothermal and photovoltaic solar power as well as investments into storage, transmission and distribution of electricity (EU Taxonomy aligned). | 84% |
| Woodside Energy Group Ltd | Oil & Gas | Acquisition of the Beaumont New Ammonia Project ($2.35 billion) | 48% |
| China Petroleum & Chemical Corp | Oil & Gas | Invested RMB56.4 billion into green and low-carbon businesses, including hydrogen, wind and solar power. | 41% |
| Taiwan Cement Corp | Cement | Invested NT$8,265,685 into enhancing green production processes, low-carbon technologies, and energy-saving facility construction. | 24% |
| BlueScope Steel Ltd | Steel | Invested NZ$300 million into Electric Arc Furnace (EAF) projects. | 22% |
Source: Clarity AI; Data sourced from corporate disclosures in 2025.
However, most companies remain far behind. Green CapEx ratios among laggards remain extremely low, falling below 1% for some electric utilities and below 5% in sectors such as oil & gas, steel, and cement.
Green CapEx should be interpreted as a point-in-time indicator and does not fully capture a company’s broader transition strategy. Lower current ratios may reflect past investments or planned future spending, making it important to assess capital allocation over time and within the context of each company’s specific strategy.
From disclosure to capital allocation
As disclosure frameworks evolve to incorporate standardized transition metrics such as green CapEx, the focus for investors will increasingly shift from the volume of reporting to how capital is actually allocated.
This shift has important implications. In lower-disclosure regions, stronger performers may become more visible as reporting improves. At the same time, differences across sectors may narrow as early-stage investments scale into larger, capital-intensive deployments.
More fundamentally, the transition is moving away from qualitative pledges toward measurable financial commitment. In this context, green CapEx is emerging as a key indicator of credibility, helping investors distinguish between companies that are actively retooling their business models and those that are not.
As transparency improves and benchmarking becomes more robust, access to consistent and comparable data on capital allocation will become increasingly important. For investors, this means going beyond disclosure to understand how capital is deployed in practice.
Ultimately, assessing the transition requires following the capital: identifying which companies are not just setting targets, but investing in the changes needed to achieve them.
References
1. Includes 650 high-impact companies globally across eight carbon-intensive sectors: Airlines, Aluminum, Auto Manufacturers, Cement, Electric Utilities, Marine Shipping, Oil & Gas, Steel.
Author Information
