Business domain
Capital Allocation
This is about ensuring that financial decisions tied to a company's climate plans, including capital allocated to mitigate negative impacts on people, treat people-centered considerations as a genuine input, not an afterthought once the business case is already approved.
Climate investment cases are usually built on cost, return and emissions reduction, with social risks and benefits left out of the appraisal and the budget. Strong capital allocation practice supports alignment between the company's business model, its strategy, and climate transition plan that addresses both impacts and opportunities for people, informed directly by implementation results and feedback from affected stakeholders (including through grievance processes). Investment decisions explicitly weigh long-term social value creation alongside financial and climate objectives, rather than treating these as separate conversations. By integrating impacts on people and their associated business implications into investment appraisal, companies can direct capital toward more resilient investments and anticipate potential disruption before decisions become difficult or costly to reverse.
Key questions to ask
- How are people-related impacts considered in financial decisions related to the company's climate plans?
- Has the company allocated capital to mitigate adverse impacts on people and support benefits associated with its climate transition?
A practical pathway to greater maturity
Capital Allocation
Beginning
- Limited resources have been allocated on a case-by-case basis to address people-related impacts associated with climate action.
Developing
- Consideration of impacts on workers, communities, consumers and other stakeholders is incorporated into priority climate-related investment decisions.
Established
- Capital allocation has expanded from addressing people-related impacts of priority climate-related activities to addressing people-related impacts across the broader climate strategy.
- Investment proposals related to decarbonization, adaptation, and carbon offsetting (where relevant) systematically include assessment of risks and opportunities for affected stakeholders.
Leading
- Capital allocation supports alignment of the company’s business model and strategy with a science-aligned climate transition plan that addresses people-related impacts and opportunities. It is informed by implementation results and feedback from affected stakeholders (including through grievance mechanisms).
- Investment decisions explicitly consider long-term social value creation alongside financial and climate objectives.
