Internal Carbon Pricing (ICP) has become a popular tool for companies to reflect climate policy risk to business performance and future investments. The analysis has shown a large variance in carbon price assumptions across companies, even within the same industry sector. However, this variance is not explainable by financial performance, suggesting that management teams are making diverging bets on the impact on their industries of future climate policy and the urgency at which their business models need to adjust in order to be successful in the future. Consequently, we believe that strategy and sustainability leaders will, increasingly, be asked to explain widening ICP differentials from competitors.
In this commentary by Yassir Ahmed, Joyce Kim, and Alvero Bertan, we investigate some common misconceptions around ICPs for large corporations and opine on the implications for management.
Read more on the debunking of myths around internal carbon pricing here.
