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.
Nicholas Bloom, Philip Bunn, Paul Mizen, Prachi Srivastava, Gregory Thwaites and Ivan Yotzov
23 December 2025
Energy Economics 1542025
DOI: 10.1016/j.eneco.2025.109097
https://www.sciencedirect.com/science/article/pii/S0140988325009272?ssrnid=5191602&dgcid=SSRN_redirect_SD
This work is published under POID and the CEP's Growth programmeGreen Transition programme.