Introduction

Companies have a central role to play, not just in reducing their own emissions, but also in shaping the systems, policies, and innovations that will make reaching global net zero possible. However, for most companies, achieving their own climate targets (particularly Scope 3 reductions and SBTi-aligned net zero) is largely out of their direct control.

Their ambitions depend on the broader deployment of clean energy, low-carbon transport, efficient industrial processes, and scalable carbon removal. In other words, companies cannot reach their targets alone; their success is tied to, and dependent upon, systemic change. Companies need to fund this change, to help create the world their targets require. 

When Milkywire launched the Climate Transformation Fund in 2021 with Klarna as the first donor, our ambition was to model how to fund climate action in a way that is credible, impactful, and catalytic, while creating a blueprint for corporate leadership in climate. That’s why the fund was designed to be broad, covering a range of climate solutions: from protecting and restoring nature, to reducing emissions, to developing and scaling carbon removal.

Since then, a working consensus has emerged of what credible climate action looks like, shaped by organizations such as SBTi, Gold Standard, New Climate Institute, WWF, and us at Milkywire; 1) account, disclose and reduce emissions, 2) price emissions with a carbon fee, 3) fund high-quality climate action, and 4) report progress transparently and make honest claims. The CTF was our attempt to draw a blueprint of how to complete step 3, guided by the question of how to maximize the impact of companies’ climate budgets toward shared global climate targets.

Now, after five rounds of funding allocations, thousands of project reviews, and $17 million disbursed to nearly 70 unique projects, we have spent significant time trying to answer this question. It has been the intellectual core of the fund. Our work has given us a realistic view of how to deploy catalytic climate funding, and what would be needed to scale corporate climate finance outside of value chains. We’ve spent a lot of time considering how to allocate limited corporate climate budgets for maximum real-world effect and how to weigh immediate emissions reductions against longer-term bets like carbon removal or policy advocacy. 

But we have come to learn that another, far more important, question remains unsolved: How do you motivate companies to contribute to climate action in the first place?

This question depends on psychology and culture, the zeitgeist of the moment. Inertia plays a major role. When the bandwagon is rolling, it's easy to motivate people to jump on. But when the wagon is standing still, it's very hard for any single actor to manually restart it. 

When we launched the CTF, we didn’t try to explain why companies should act. It was designed to be a tool for companies that were already motivated to become best-in-class climate companies. The number of companies with this motivation seemed to be growing, and our goal was to offer a credible mechanism to do it right. This group of companies still exists, but is smaller than before. And for some, climate is lower on their list of priorities. The question of why has become a major question for many companies and, unlike before, there’s much less societal momentum to build off of.

The insights in this report are drawn from five years of running the Climate Transformation Fund, observing corporate behavior, evaluating high-impact projects, and reflecting on the broader climate, policy, and market landscape. Together, these lessons show our perspective of how companies can show corporate climate leadership and strategically direct their budgets to create the systems changes their targets depend on.

Key takeaways include:

• Credibility is largely solved: There is now a clear, shared understanding of how to account for, price, fund, and report emissions responsibly.

• System change unlocks the highest leverage: The most effective corporate investments remove regulatory, institutional, or informational barriers that prevent scalable, cost-effective solutions.

• Motivation remains the biggest gap: Many companies could act, but need compelling narratives and framing that link their ambitions to the systems they depend on.

• There is a need for a clearer framing of corporate agency: how taking responsibility for ongoing emissions fits alongside companies’ own reduction efforts and the claims they can credibly make.

Global trends shaping the landscape

Weakening global momentum

The ten years between 2015 and 2024 could be called the “net-zero decade.” After the Paris Agreement in 2015, enthusiasm for climate rose quickly and peaked around COP26 in Glasgow in 2021. The green wave started to recede after Russia's invasion of Ukraine in February 2022, and this trend was accelerated after Trump's return to the White House at the beginning of last year. Today, fewer climate-positive policies are being implemented, private investment in climate is decreasing and climate has fallen as a top priority for voters in a range of countries. The zeitgeist of the net-zero decade is weakened and we are moving into something else. 

At the same time, multilateralism has become less reliable. Protectionist policies such as tariffs, the American exit from the Paris Agreement, and the weakening of institutions such as the WTO and the World Bank have reduced the space for coordinated climate action. As a recent example of this trend, we saw the U.S. use their power and leverage to block the net-zero framework from being adopted by the International Maritime Organization. Taken together, this has left countries and companies to act on their own if they continue to try to reach their climate targets.

Yet, at the same time, we see progress accelerating in some areas. Renewable energy continues to be built out at a breakneck speed. The cost of both solar energy and battery storage continues to fall. Sales of electric vehicles and trucks are rising rapidly in China and in many other markets. 55% of emission reductions could be implemented as cost-saving measures, and another 10% could be deployed at a low cost (BCG, 2025). However, some of these opportunities remain constrained by regulation, inertia, lack of knowledge, lack of access to capital and more. Recent clean development has not been sufficient to bend the global emissions curve, and global emissions are projected to have increased again in 2025.

High-cost climate solutions depend on comprehensive climate policy

Cheap climate solutions often need some policy support, but solutions with high mitigation costs will only scale in policy environments that put an effective price or binding constraint on all emissions. Without that, they remain permanently uncompetitive and are deployed, at best, as isolated pilots.

This means that CDR, CCS, hydrogen, electrofuels, and other solutions high on the marginal abatement cost curve will not be implemented widely in jurisdictions that lack economy-wide carbon pricing or a cap-and-trade system with a credible path to near-zero free allowances.

In practice, however, the EU and the UK are currently the only jurisdictions where this creates a viable demand signal for high-cost solutions like CDR and CCS at scale. This is because they combine a declining economy-wide emissions cap with a Carbon Border Adjustment Mechanism (CBAM) (in planning stage for the UK), which protects high-cost decarbonization investments from being undercut by imports. If CBAM fails or is weakened, even this incentive collapses. 

The carbon dioxide removal (CDR) credit market got started, but is currently treading water

On the CDR market side, we have seen rapid growth in procured tonnes, but this growth is primarily driven by Microsoft. Without a broader buyer base, the market is vulnerable to shifts in a single company’s budget, leadership or narrative tolerance. Many companies still see no compelling reason to buy CDR and the main voices encouraging them to do so are CDR market participants. 

Some momentum for Beyond Value Chain Mitigation

The latest draft of the SBTi Net Zero standard introduces a structured way for companies to take financial responsibility for their ongoing emissions. SBTi proposes that all companies will need to disclose whether they finance climate action, and those who don’t must explain why. At the same time, SBTi will give official recognition to those who fulfill the stated minimum criteria. The transparency and promised recognition for those who act offer some hope. It gives companies a way to act outside their value chains without being accused of greenwashing, and it provides policy-aligned logic for funding mitigation wherever it is most effective. But it remains to be seen if this will be enough to make companies act.

Evolving reporting frameworks and the “multiple ledgers” idea

Corporate climate reporting is also starting to adapt to these realities. The traditional “one ledger” model, focused on physical emissions under the Greenhouse Gas Protocol, is being complemented by ideas for parallel ledgers that capture different kinds of climate action.

There is already a precedent in Scope 2. Companies report both location-based emissions (reflecting the physical grid mix) and market-based emissions (reflecting contracts such as power purchase agreements). A similar structure is now being proposed more broadly. Initiatives such as The Task Force for Corporate Action Transparency (TCAT) have introduced the idea of tracking not just physical emissions, but also:

• the contractual footprint associated with certificates like SAF credits and green steel,

• the effects of actions that decarbonize operations or supply chains in ways that do not immediately show up in the inventory, and

• the impact of interventions beyond the value chain, such as nature protection or carbon removal.

The GHG Protocol is considering related changes, but any official update is likely years away. The unresolved issue is how claims will work in such a system. It is possible that companies will need to set multiple targets: one for their physical footprint (including explicit recognition of the external factors they depend on), and additional targets for the impact of their interventions. The basic accounting architecture is slowly moving in a direction that can accommodate more nuanced climate action. The question on how to make claims based on this logic is still lagging behind though.

How these trends influence corporate behavior

The corporate net-zero paradigm is shaking

There is an increasing realization among companies that their net-zero targets (especially for Scope 3) were always conditional on larger societal change and policy change. More and more companies are recognizing that the emission reductions required to meet these targets are beyond their immediate control. At the same time, the ability to get official recognition for the use of carbon credits to meet targets, including carbon removal, feels increasingly uncertain. The SBTi does not allow them (only CDR for the last 10%), and many companies fear accusations of greenwashing if they use credits to reach targets. 

A narrative vacuum has replaced the old net-zero zeitgeist. “Net zero by 2050” only provided the first part of the story, nothing equally powerful exists for the next steps that companies need to take. Companies are left without a simple story that tells them why they should act, what “good” looks like, or how to talk about climate in a way that feels safe. Without a shared narrative, most corporate climate teams become reactive and defensive rather than ambitious.

Action relies on individual conviction. The era where companies acted because “everyone else is doing it” is mostly over. Today the companies taking meaningful action are mainly the ones where a CEO, CSO, or founder has the conviction and integrity to value climate impacts appropriately. This creates an uneven landscape where ambition varies not by fundamentals, but by personality and internal politics. It can also make progress fragile, since if a key champion leaves, the climate strategy is at risk of decaying.

Companies focus on what they can count towards their targets

There has been a clear trend in corporate climate action to focus inward on what they can use to fulfill targets and what is easy to justify to auditors and comms teams. This internal focus narrows the space for catalytic action and accelerates the shift away from global-impact logic toward accounting-driven logic. That means buying credits or financing climate action beyond value chains is less popular. 

Some emissions-reduction funding will likely move toward environmental attribute certificates: green steel, sustainable aviation fuel, low-carbon materials, and other interventions purchased inside the value chain. These purchases are easier to justify internally, generate fewer reputational risks, and slot more neatly into existing reporting frameworks. They help specific sectors decarbonize but do not necessarily direct money where climate impact per dollar is highest.

High-profit, low-emission companies are far from fully tapped

Most companies that finance climate projects have high margins, relatively low emissions, and few mechanisms to reduce emissions internally. Such companies typically come from sectors including finance, tech, pharmaceuticals, entertainment, luxury brands and more. There are many companies with these characteristics (high profits per tonne and limited internal abatement options) that still don’t fund climate projects. They represent latent potential within the corporate sector; capital that may be unlocked if a motivating narrative returns.

Against this background, we need to get realistic about what can be expected from companies on climate. We believe it is less than many activists demand, but more than most companies are doing today.

Broad learnings from funding projects in the CTF

Funding direct emission reductions effectively remains difficult

One of the biggest learnings has been how hard it remains to fund direct emission reductions in a catalytic way. Many projects we reviewed suffered from one or more problems:

• lack of additionality (they would likely happen anyway),

• limited mechanisms for channeling grants or credits in a way that closes the cost gap,

• costs so high that our funding would be marginal relative to the need, or

• lack of clear system-level effects.

There are exceptions. LUMS’s pilot of solar-charged electric three-wheelers in Pakistan showed how relatively small grants can be used to de-risk a business model with clear operating cost advantages over fossil alternatives. Once the charging infrastructure and vehicle performance were demonstrated in practice, the case for commercial scale-up became much stronger.

By contrast, New Energy Nexus’s support for electric boat motors in Indonesia led to a different conclusion. In that context, battery performance, upfront costs, and operating conditions meant that the technology was not yet competitive, even with support. The intervention was still valuable, but primarily because it clarified that the bottleneck was technological and economic readiness, not access to early capital.

Taken together, these experiences suggest that using limited corporate climate budgets to “pay the green premium” is rarely the highest-leverage approach. Where clean alternatives are already cheaper or close to parity, the bigger constraint is often regulation, infrastructure, or institutional capacity. Addressing those structural barriers is more likely to unlock scale than subsidizing deployment project by project.

The biggest opportunities are in system change, not direct deployment

Related to this, one of the most important findings from the CTF is that the largest opportunities lie in system change.

The majority of emissions cuts needed in the near term are cheap or even cost-saving. Report after report reaches the same conclusion. Yet these solutions are not scaling nearly fast enough. Many of the projects we have funded work within this gap: organizations such as Beyond Zero Emissions, Clean Air Task Force, Industrious labs, and New Energy Nexus are focused on changing policies, business models, and institutional capacity so that cost-effective solutions can grow.

The barriers they address are not primarily financial in the narrow sense. They are regulatory, institutional, cultural, and informational. Old rules, slow permitting, misaligned incentives, weak governance and coordination, and lack of technical capacity create friction that holds back even cost-competitive climate solutions.

At the same time, most corporate climate targets are conditional on these same barriers being dismantled. For Scope 3 emissions in long value chains to fall rapidly, societies need clean electricity, low-carbon transport, efficient heating, and “low-hanging fruit” industrial decarbonization rolled out at scale. No single company can deliver this on its own. But collectively, companies can fund the people and institutions who unblock the system. The initiatives that remove these barriers can unlock billions of tonnes.

Examples from CTF funding unlocking barriers

• Beyond Zero Emissions pushing for permitting and planning reforms in Australia.

• Clean Air Task Force supporting industrial decarbonization readiness in Africa.

• New Energy Nexus building capacity for renewable energy startups in Indonesia.

• Industrious Labs accelerating industry-wide policy reforms for electrifying aluminum production in the USA and switching to cheap lower emission cement manufacturing in the Global South. 

• LUMS and Neubolt piloting clean e-rickshaws work with lower running costs and fast payback in Pakistan, proving clean transport business models so they can later scale without subsidies,

The biggest opportunities for climate funders are not in paying for more solar farms, heat pumps, or EV fleets directly. Those can increasingly be financed through normal markets once conditions are right. The highest-leverage use of philanthropic or discretionary corporate funds is to create the enabling conditions that allow those markets to function at the speed demanded by climate goals.

Don’t let measurability stand in the way of impact 

Something we have realized is that supporting all solutions that are needed for global net zero, and wanting to maximize your impact, sometimes means giving up on trying to measure your impact precisely. 

Of course, some projects have outcomes that are straightforward to measure. Our nature restoration partners, such as Plant With Purpose and Justdiggit have delivered tangible, verifiable results: trees restored, tonnes of carbon removed, and livelihoods improved. These measurements are reliable and vital. The strength of these projects lies in demonstrating that enabling conditions locally could result in cost-efficient restoration interventions, but the projects themselves are not necessarily system-transforming. 

Other projects have outcomes that are harder to quantify but have a larger potential impact. Policy and advocacy initiatives, such as New Energy Nexus's work on creating a conducive policy environment for renewable energy in Indonesia or Clean Air Task Force’s work to accelerate decarbonization in Africa, can influence decisions that prevent millions of tonnes of emissions. That impact can take many years to surface and the credit can be hard to attribute to any specific actor or donor, but these are precisely the kinds of interventions that change the underlying conditions for large system change. One strong example partly funded by the CTF, was Human rights watch successful work with allies to stop the permit for a new coal power plant in Bosnia. This shows how this approach can lead to great success, but is still not an example where we could see exactly how many tonnes avoided our funding led to.

Learnings on carbon removal

During our five years of operations, the carbon removal sector matured from scattered prototypes in laboratory environments to an emerging industry. The CTF has played an important role in that development. We have supported more than 40 suppliers across biochar, mineralization, enhanced weathering, direct air capture, direct ocean removal, biomass storage, and other novel approaches. Many of these companies have raised follow-on funding, built pilots, or started constructing their first facilities. Timelines have often slipped, and progress is uneven, but the overall trajectory is clear.

Our role has been to act as a catalytic buyer rather than a volume-maximizing buyer. As formulated in our catalytic CDR strategy, we have focused on:

• supporting promising new methods and variations of existing methods that need real-world testing,

• helping startups reach milestones that unlock further funding,

• backing projects that generate valuable data and learning for the whole ecosystem,

• seeding approaches with strong co-benefits and in underrepresented geographies.

This means that we have often prioritized innovation, learning, and ecosystem development over maximizing tonnes purchased in the short term.

Looking ahead, we continue to see the 2020s as the “CDR startup decade”: a period for identifying which approaches work best and establishing the conditions for growth. Large-scale commercial deployment will, if it happens, come later. In that context, the role of catalytic buyers remains important; even as larger buyers enter, there are still gaps where early-stage ideas or neglected approaches struggle to find support.

For the next phase, our CDR focus will likely shift from breadth to depth. We will continue supporting very promising, novel first-of-a-kind technologies as long as our funding makes a real difference. At the same time, we will place more emphasis on suppliers that have begun to deliver and have a credible path to scale, helping them reach more stable ground.

What is optimal is a question few engage in

We’ve also seen that while Milkywire’s mission is to maximize climate impact per dollar, relatively few companies share that mindset. Many still view climate giving symbolically rather than strategically. When most are not giving at all the question of what is optimal becomes less relevant. Our goal remains to show what optimal climate philanthropy looks like, how to direct limited funds toward the highest possible leverage, and to make that model easier for others to follow.

Our next steps for the CTF

The past five years have made one thing clear: companies need clearer framing for why and how to act.

Most large companies now have:

• Near-term emission reduction targets. Here, action focuses on operational efficiencies, procurement choices, and supplier engagement.

• Long-term net-zero targets. These are more like visions, conditional on broader societal change in grids, infrastructure, and materials, as well as on the availability of tools such as carbon removal.

External climate funding can play different roles relative to these:

• Some companies have or will set near-term net-zero targets for a subset of their emissions. For them, purchasing carbon removal can be a credible tool to take responsibility for the emissions that still remain and reach operational net zero (Scope 1, Scope 2, and business travel) in the near-term. 

• Beyond that, companies can fund the system-level work that their long-term targets are dependent on: the unblocking of cheap solutions, the strengthening of institutions, and the development of long-term options such as carbon removal.

The largest gap is not in the availability of climate projects, but in motivation and framing. There is still a broad group of companies that could act, and in some cases want to do something, but need a compelling reason to act tied to their own targets. 

Our next task is therefore not only to refine what we fund, but to provide clearer and more compelling narratives that help companies understand the role they can play in enabling global net zero. This means being explicit about the limits of what corporate climate action can achieve on its own, while also showing why companies need to fund the broader climate solutions their own net-zero targets are conditional on. In a previous article A new lens on net zero, we laid out a lens for how these pieces fit together in a more coherent net-zero strategy. More publications are to come.