Regulatory complexity tops list of barriers to climate action

To what extent, if at all, have the following factors inhibited your company's ability to initiate climate-friendly investments in the last 12 months?

Over a third of business leaders report that regulatory complexity significantly impedes their climate investment initiatives, far outweighing other potential barriers such as financial constraints or stakeholder demand. This finding from our latest CEO Survey reveals a critical disconnect between policy intentions and real-world implementation.

The regulatory landscape for climate-friendly investments has become increasingly intricate, with 52% of CEOs indicating that regulatory complexity inhibited their company’s ability to initiate climate-friendly investments to a moderate or large extent. This challenge is particularly acute when compared to other potential barriers – only 11% cite lack of available finance as a major constraint, while a mere 9% point to board-level resistance.

While governments worldwide are pushing for accelerated climate action, the very frameworks designed to enable this transition are inadvertently creating friction. The data suggests that streamlining regulatory requirements, where appropriate, could unlock significantly more private sector investment in climate initiatives.

The path forward requires a three-pronged approach:

• First, regulatory bodies should establish innovation-friendly sandboxes specifically designed for climate investments. These controlled environments would allow companies to test new green technologies and business models without facing the full burden of regulatory compliance from day one. Companies could pilot initiatives under close supervision while gathering data on environmental impact and economic viability, helping regulators refine their frameworks based on real-world evidence.
• Second, we need to develop standardised frameworks that harmonise requirements across different jurisdictions. This includes creating unified reporting standards, aligned taxonomies for sustainable activities and consistent measurement methodologies for environmental impact. By reducing the complexity of operating across multiple regulatory regimes, companies can scale their climate initiatives more efficiently and reduce compliance costs.
• Third, regulatory agencies should implement fast-track approval processes for climate solutions that have demonstrated success in other markets or jurisdictions. This could include establishing ‘green lanes’ for proven technologies like renewable energy systems or energy-efficient building solutions. Such streamlined processes would maintain rigorous standards while accelerating the deployment of vital climate solutions, particularly for technologies with established track records of safety and effectiveness.

For CEOs, the message is clear: while building internal consensus and securing financing for climate initiatives appears achievable, success requires sophisticated regulatory expertise. Organisations should consider establishing dedicated teams that combine sustainability expertise with regulatory compliance skills to unlock this untapped potential.