The industrials sector emits 25% of global carbon dioxide (CO2) emissions. Including construction inputs such as cement, steel and iron, as well as petrochemicals such as plastics and ammonia, the sector includes many high emitting activities known to be hard to decarbonise.
As the global economy accelerates its efforts to meet the goal of net-zero emissions by 2050, the industrials sector will have both a crucial role in decarbonising the global economy and face substantial transition risks. Growing policy pressures, risk of legal and reputational damage, and technological innovations will reduce the market share of conventional producers with less carbon-intensive alternatives.
Relying on stable climate conditions to enable effective operations in complex supply chains, the industrials sector is also at risk from the physical impacts of climate change such as storms, droughts, and wildfires that will make current industrial practices more difficult or risky.
This brief explores the key physical and transition risks that banks, investors and insurers with clients in the industrials sector face. It includes case studies and provides concrete recommendations to identify and mitigate climate risks in the sector, while aligning financing with a just transition approach that considers the impact of the transition on workers, indigenous groups and local communities.
The resource is part of a series of briefing notes covering major economic sectors and their associated physical and transition climate risks including briefing notes on the agriculture, real estate, and oil and gas sectors. Stay tuned for upcoming briefs on the transport, metals and mining and power generation sectors.