The financial services industry is forecast to increase its spending fivefold on carbon management technology over the next five years.
The forecast comes from independent research firm Verdantix which predicts that spending will reach $256 million by 2027 compared to just $51 million in 2021.
The big driver for this spending increase is the adoption of regulations such as the Task Force on Climate-Related Disclosures (TCFD).
According to Verdantix, financial services firms, including investment managers, need specialist software to track data and estimate Scope 3 carbon emissions stemming from their portfolio companies.
The TCFD 2022 status report found that 43% of surveyed financial services firms described the disclosure of Scope 3 carbon emissions as 'very difficult'.
"Combined regulatory and non-regulatory drivers will increase demand for carbon management software dramatically," said Alessandra Leggieri, ESG & sustainability analyst at Verdantix.
"Economic factors such as high inflation will have a minimal negative impact on budgets because of strong regulatory pressure. Firms should start implementing carbon management software now to streamline their data collection and reporting."
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