Report: Listed firms responsible for environmental damages worth 4% of global GDP

The world’s largest listed companies caused environmental damages worth US$3.71 trillion in 2021 – equal to more than 4% of global GDP, according to a new report by S&P Global and the Capitals Coalition.

The analysis looked at damages caused by the direct operations of more than 12,000 companies in the S&P Global Broad Market Index (BMI), not including their upstream and downstream supply chains. 

Beyond the almost US$4 trillion of environmental damages caused by these firms collectively, the report also found that more than a quarter (26%) of companies in the index generated environmental costs larger than their net income – yet these costs largely go unrecorded.

By putting a monetary value on these “unpriced” environmental costs, S&P Global Sustainable1 and the Capitals Coalition hope to support investors in assessing the full costs and potential risks of the business activities in their portfolios, as well as creating a benchmark to monitor corporate sustainability progress.

Fossil fuels and greenhouse gases cause most unpriced environmental damages

According to the analysis, greenhouse gas (GHG) emissions are responsible for the majority of unpriced environmental damage costs (63.6%) for S&P BMI companies. Their monetary value was calculated by multiplying companies’ estimated GHGs by the social cost of carbon value established in 2016 by the US government. 

GHG emissions are followed by air pollution at 26.2% of overall environmental damages costs – both largely due to the generation of electricity from fossil fuels (especially coal).

Because of that, environmental costs are not spread evenly around the world: instead, regions that still rely largely on coal and other fossil fuels for power generation make up the large majority of costs. Eastern Asia represents 47% of the total and more than US$1.7 trillion, followed by Northern America (14%) and Southern Asia (4%).

Globally, the report found that six sectors are responsible for more than 92% of total environmental damage costs: fossil fuel electric power generation, manufacturing of primary materials, mining and quarrying, transportation, crop cultivation, and livestock production.

In particular, crop cultivation and livestock production firms generate the majority (57%) of land use-related environmental damage costs, despite their high dependency on ecosystem services.