Key findings
• Activity spiked after passage of the Inflation Reduction Act in 2022
• Introducing the BiGS Climate Innovators 100 list
BOSTON—Groundbreaking research led by a team of Harvard Business School scholars reveals a major trend in American business: A large and growing number of publicly traded companies across sectors in the U.S.— nearly 900 — are working on technologies designed to reduce global warming. Equally important, that activity spiked after the U.S. passed its largest-ever climate policy in 2022.
The new data shows that the number of U.S. public companies in relevant industries telling regulators and shareholders they are actively addressing climate solutions has doubled in almost two decades, underscoring how broadly Corporate America is starting to address climate change as an economic opportunity rather than just as a risk. The data shows that 45% of public companies in relevant industries told the U.S. Securities and Exchange Commission (SEC) in reports published in 2023 that they are working on climate solutions, up from 20% in 2005.
The 879 companies represent about $8 trillion in market capitalization, or roughly 20% of all U.S. market capitalization. Their combined $6 trillion in revenue approaches the size of America’s annual federal budget. The companies span a diverse array of industries, from apparel and agriculture to technology and transportation. They are advancing 88 different kinds of climate solutions, from installing LED lighting in the city of Memphis to generating sustainable fuel at carriers like United Airlines to generating nuclear power at companies like Dominion Energy, the research found.
“We were surprised to find that 45% of public companies in relevant industries are telling regulators that they are either delivering or investing in climate solutions,” George Serafeim, the Harvard Business School professor who has led the research for more than two years (with Harvard's Data Digital Design Institute), told the Institute for Business in Global Society’s BiGS Fix. “This tells us that companies are serious about capitalizing on the opportunity presented by the transition to a low-carbon economy.”
To uncover these findings, the scholars examined 13 of 25 industry groups listed by the Global Industry Classification Standard, an international guideline that classifies companies by their key business activity. They focused on industry groups that are capable of directly developing climate solutions while excluding sectors that have no impact or only indirect effects. For example, they excluded banks and pharmaceutical companies due to their indirect impact on climate solutions and included high-polluting industries like energy and chemicals because many companies within those sectors need to transform their operations and products to address climate challenges.
The result is a body of research that paints a broad, evidence-based picture of how the economy in the United States is changing in fundamental ways, a picture painted with data straight from Corporate America’s C-suite offices. It also yielded a new measure that reflects these changes — the BiGS Climate Innovators 100, a list of companies based on this research and ranked by a proprietary climate measure. These are the companies that are most actively delivering tangible climate solutions versus making unverifiable claims and setting uncertain goals, which regulators are increasingly cracking down on as “greenwashing.”
“Hundreds of CEOs are now changing company strategy and behavior, recognizing the fundamental economic opportunity presented by the climate transformation,” Serafeim told The BiGS Fix. “The collective impact of those changes may be profound.”
The research also suggests that companies that are focusing on climate solutions are “associated with higher revenue growth but also higher costs to support this growth leading to lower short-term profitability margin. At the same time the firm's valuation in public markets is higher, suggesting investor expectations for higher long-term profitability,” said Harvard Business School Assistant Professor Shirley Lu.
‘A new tool to analyze American companies’
In January 2022, Serafeim joined Lu and HBS Postdoctoral Fellow Simon Xu to study whether companies were starting to consider climate change as a business opportunity rather than just a risk.
They decided to examine the 10-K filings that every U.S. public company is required to submit annually to the SEC, which regulates publicly traded companies. Unlike some voluntary reports on climate efforts, 10-K reports are standardized for all public companies, meaning firms can’t cherry pick the data they share. Both chief executive officers (CEOs) and chief financial officers (CFOs) must sign off on 10-K filings, and companies are legally accountable for accuracy.
“In a situation where we don't have good data, we can go to a source where companies traditionally have been telling us about their products, something they have to disclose constantly year-over-year with high trustworthiness—and that is their 10-K,” Lu told The BiGS Fix, which publishes research-based knowledge and news on topics involving business and society including climate change, diversity, and economic inequality.
Using artificial intelligence tools, the Harvard Business School researchers created a unique large-language model to analyze each sentence in Item 1 of the 10-K reports, the section that contains key details about a firm’s operations, products and services. The AI tool allowed them to extract insights, detect trends, challenge myths and create an innovative new way to examine and understand American companies.
The researchers analyzed 39,710 financial documents—millions of pages—submitted to the SEC by 4,483 publicly traded companies in relevant industries between 2005 and 2022. In fiscal 2022, 1,974 companies reported to the SEC, among which 879 companies devote at least 1% of the language in the relevant portion of their 10-K filings to a discussion of climate solutions, which is 45% of all public companies in the 13 climate-relevant industries.
Even if that number was increased to 5% of the language, that would mean that 392 companies, or 20% of all public companies in climate-relevant industries mentioned climate solutions that they are developing or selling.
The researchers then created an algorithm that produces a “climate solution measure,” allowing companies to be ranked and compared according to their climate-related work. The resulting data was used to generate several academic papers, and then given to HBS's Institute for Business in Global Society, which produced this series, including the BiGS Climate Innovators 100 list, which contains companies with more than $1 billion in revenue.
“This is a new tool to analyze American companies, but it is also a measure of the transformation of the U.S. economy to be competitive in the future,” Serafeim said. “This database will continue to grow, and it will continue to produce new insights. It will give scholars, journalists, entrepreneurs, policymakers, investors and NGOs a better understanding of what is happening in the U.S. economy.”
A trove of takeaways
Here are some of the top findings revealed by the research:
Climate work spiked after passage of the Inflation Reduction Act. Though there is only a limited amount of data available following the passage of the Inflation Reduction Act (IRA) in 2022, the largest-ever government investment in climate solutions in U.S. history, the research shows that companies responded aggressively. By studying firms two years before and two years after passage of the IRA, the researchers found that more than 42% of the companies experienced an average increase in climate solution measure from before the IRA (2019, 2020) to after its passage (2021, 2022).
These firms represent a financial force. Collectively, the 879 firms that listed relevant climate work on their SEC filings posted nearly $6 trillion in revenue, an amount comparable to the annual federal budget of the United States. They have a market capitalization of $8 trillion, roughly 20% of all U.S. market capitalization.
The BiGS Climate Innovators 100 list. The first-ever list shows that SolarEdge Technologies, which sells solar technology to companies that install systems in large commercial projects, ranked number one. Tesla, the electric vehicle firm run by billionaire Elon Musk, was second and Sunrun Inc, which designs, installs, and finances customized solar panels for homeowners, was third. The top 100 list can also be ranked by revenue, showing the largest companies involved in climate work are Valero Energy, General Motors and Archer-Daniels-Midland.
Most are companies in transformation. The majority of these companies (92%) are companies that are not solely focused on climate solutions, including older firms like global plastic and chemicals company Dow Inc. (ranked #43), which employs about 35,0000 people, and industrial food firm Archer-Daniels-Midland (ranked #54), which employs about 38,000 people. Only a small percentage are “pure play” climate solutions companies such as Tesla and Beyond Meat.
Few are household names. Many of these firms don’t have easily recognized brands because most sell their products and services to other businesses and do not necessarily spend millions of dollars on consumer ads and PR campaigns. Among the top 10, only Tesla is a household name.
Two in five are based in Republican-leaning states. About 40% of these firms are headquartered in states that voted for the Republican candidate in the 2020 presidential election, and in some cases these states are not implementing policies to accelerate climate solutions.
Firms see climate as an economic opportunity
The research indicates that public companies are increasingly pursuing strategies to reduce human-made carbon emissions, and in some cases weaving these efforts across their company. The researchers say this is a change from traditional thinking, which tended to view climate efforts through the lens of risk.
“When people think of climate, some see it as ‘lots of risk’ and it generates negative consequences,” Lu said. “At the same time, others see it as an opportunity that generates a lot of innovation and growth potential."
In chemicals manufacturer Dow’s most recent 10-K filing, for example, it touts several climate technology projects as “investments that are being progressed over the next several years and are expected to enhance competitiveness.” The company states a goal of becoming “the most sustainable materials science company, with a strategy to advance the well-being of humanity by helping lead the transition to a sustainable planet and society.”
Dow also says it aims to further enable “a shift to a circular economy for plastics” by focusing on recycling and resource efficiency. It plans to build a clean hydrogen plant in Europe “where by-products from core production processes would be converted into hydrogen and CO2,” reducing carbon emissions.
While the research shows that the number of companies working on climate solutions is growing, Serafeim considers 45% beyond a tipping point, both for companies and the U.S. economy overall.
“The data tells us that green transition is real, and we see almost every one of the country’s biggest industries changing,” Serafeim told The BiGS Fix. “It’s time for executives, board members, investors, workers, politicians and communities to understand that the climate transformation is now a business imperative that has implications for leadership, strategy and finance. The companies on this list are leading the charge to develop new products and real solutions for their customers.”
U.S. climate policy spurred corporate action
Harvard Business School’s research also revealed early empirical evidence that the nation’s largest climate policy, the Inflation Reduction Act (IRA), is doing what it was intended to do: Make major investments in clean energy infrastructure, spur companies to action and ultimately reduce the nation’s reliance on fossil fuels.
Signed into law on August 16, 2022, the IRA is channeling nearly $369 billion into climate solutions and many companies tell regulators that they are taking advantage of it.
For example, Ameresco (ranked #9), a renewable energy and energy efficiency company that serves commercial office owners, school districts, airports and other clients, told regulators in its latest 10-K that “the enactment of the IRA is favorable for the overall business climate for the renewable energy industry,” but that other factors such as the November presidential election could be unfavorable.
First Solar (ranked #11), which manufactures solar panels and provides utility scale photovoltaic power plants, said in its 10-K filing that the IRA prompted it to increase manufacturing to meet anticipated demand.
Specifically, the filing continues, by 2027, the USA’s current installed solar generation capacity of about 160 GW is expected to double partly due to the IRA. “As a result of such market opportunities and renewable targets, we are in the process of expanding our U.S. manufacturing capacity by approximately 8 GW,” the filing says. The firm’s filing describes plans for 2024 to open a fourth manufacturing facility in the U.S. and expand existing facilities in Ohio, and in 2025 open a fifth facility.
Most companies aren’t household names
While some of the companies on the BiGS Climate Innovators 100 list are well-known names like Tesla, many others are firms that few people have heard of. Yet across industries, the research shows that these companies are freely discussing climate-related initiatives in their 10-K reports.
Chesterfield, Mo.-based Bunge Ltd. (ranked #57) is a prime example. With roots going back more than 200 years, the global agricultural commodities company makes a wide range of products, including processed foods, beverages, cooking oils, animal feed, and baked goods that consumers won’t see advertised on TV or billboards. It also sells products to biofuel companies, which use the oil as feedstock for production. (Biofuels are expected to play a larger role in the future energy system especially for the shipping and aviation sectors, according to the International Energy Agency.)
In its latest 10-K filing, Bunge highlighted its investments in plant-based protein ingredients. Such materials are the basic building blocks to making meat substitute products that have the same texture and taste as animal meat but leave a much smaller carbon footprint.
“Our key areas of growth, comprising expansion of our oilseed processing and origination capabilities, production of renewable feedstocks, increasing our plant lipids portfolio and development of new plant-based protein ingredients, are not only core to our business strategy but also a testament to the alignment of sustainability with our corporate vision,” Bunge’s filing said.
Xcel Energy Inc. (ranked #58) is a regulated electric utility and natural gas company. In its 10-K filing, the company said it will reduce carbon emissions 80% by 2030 over 2005 levels and produce zero emissions by 2050. The company strategy’s rests with moving away from coal-fired electric plants toward renewable sources like wind, solar, and hydrogen.
“Xcel Energy’s operating footprint includes some of the best wind and solar resources in the country, providing for higher capacity factors and lower operating costs,” the filing said.
The company also noted the U.S. Department of Energy last year awarded it $1.5 billion in grants to fund projects like the Heartland Hydrogen Hub, an ecosystem to generate hydrogen power throughout the Upper Midwest.
Some brand names are working hard to reduce carbon emissions
Of course, some of the companies on the list are extremely well known. For example, United Airlines Holdings Inc. (ranked #63) is focused on reducing and eventually replacing its use of conventional jet fuel, a major source of cost and greenhouse gases. As part of its United Next program, the company said in its 10-K filing that it is upgrading its fleet to more fuel-efficient planes designed to reduce carbon emissions per seat by 20% compared to older models.
United Airlines is betting big on sustainable aviation fuel (SAF) made from renewable biomass and other waste products, which produces 85% less greenhouse gas emissions than conventional jet fuel. “The Company believes that it is the most promising technology solution in development to date that can help abate emissions from the Company's flight operations,” United’s most recent 10-K said.
Sustainable aviation fuel, however, remains expensive to make. As a result, the total volume of SAF United Airlines used in its operations as of the end of last year remained less than 0.1% of its total aviation fuel usage. But the airline is working to create a sustainable market for SAF. For example, it launched a $200 million venture capital fund to finance the development of SAF-related technologies.
“These challenges with present-day SAF have informed the Company's strategy of investing in SAF producers and technology to help scale the SAF market and unlock future supply for the Company,” the filing said.
Another well-known company that cites climate as a business opportunity in its 10-K filings is General Motors (ranked #25), which makes automobiles under the Cadillac, Chevrolet, Buick and Corvette brands and last year reported revenue of nearly $172 billion. The company also said that it created $39.2 billion worth of GDP for the American economy in 2022, nearly a quarter of total GDP generated by U.S. car makers.
GM discussed in its latest 10-K filing how climate change has forced the company to balance its long-term strategy with short-term goals. The company is transitioning away from producing vehicles based on the internal combustion engine (or “ICE,” as it’s known in the industry), which relies on fossil fuels. Instead, GM wants to focus on electric vehicles.
Yet the company still need profits from sales of traditional cars and trucks to fund investment in its EV business, and climate change and the resulting regulations and shifting consumer demands could weigh down sales.
“Our long-term strategy is dependent upon our ability to profitably deliver a strategic portfolio of EVs,” GM said in its filing. “And our near-term profitability is dependent upon the success of our current line of full-size ICE SUVs and full-size ICE pickup trucks.”
The transition at companies like GM can have an impact on suppliers and other partners. For example, American Axle & Manufacturing Holdings Inc. (ranked #53) is a major supplier of auto parts to General Motors, Ford, and Stellantis (Chrysler). In its 10-K report, the company cited the automotive industry’s move toward electric vehicles, explaining that it is directing research and development efforts toward building hybrid and electric driveline systems, including electric motors, inverters, axles, and batteries.
“We have continued to enhance our product portfolio to allow us to meet our customers' needs for high performance vehicles with reduced emissions and reduced environmental impact,” the filing said.
In an indication of pride, the company noted that it has won innovation awards related to this line of work.