NEW YORK—May 23, 2023—While energy and natural resources executives remain bullish on their long-term ambitions toward net zero, they anticipate a short-term slowdown in the rate of decarbonization due to turmoil in energy markets over the past year. They see more coal being burned to make up for shortfalls in Russian-supplied natural gas, and many expect a shift in focus back toward addressing scarcity and affordability in the next few years. These are among the findings of Bain & Company’s third annual Global Energy and Natural Resources report, launched today.

“Energy and natural resources executives are now a few years into their net zero commitments, and they’re more clear eyed about what it will take to accomplish them,” said Joe Scalise, global head of Bain & Company’s Energy and Natural Resources practice. “Their ambitions haven’t changed, and they are feeling optimistic that they’ll lead the rest of the corporate world through the energy transition. But they know it’s going to be challenging without government stepping in to support these efforts or customers paying more for sustainable products. At the end of the day, the capital to fund low-carbon businesses is there, they just need to ensure there’s going to be a return on that investment.”

Bain & Company surveyed more than 600 global energy and natural resources executives to

assess their opinions and attitudes about the progress of the energy transition, how their companies are managing through these changes, and what barriers they see ahead.

Optimism toward their own progress

Despite expecting a temporary slowdown, executives are relatively sanguine about their own abilities to meet net zero goals. Most believe their companies are outperforming the rest of the world in reducing emissions. And for the second year in a row, survey participants, on average, expect the world could achieve net-zero carbon emissions by 2057. As a group, they expect emissions reductions to broadly track current pledges through 2030, and then accelerate leading up to 2057. For this to happen, a lot would have to change after 2030, including an increase in clean energy investments from $1 trillion today to $4 trillion by 2030, according to the International Energy Agency.

Investing in new growth businesses

Companies expect to deploy about a quarter of their capital to new growth businesses in 2023, many of these focusing on low-carbon technologies. Respondents say they aren’t concerned about accessing capital for these low-carbon businesses; fewer than 20% expressed significant concerns about accessing capital. However, they are concerned about ensuring adequate returns on these investments. Four out of five executives consider the ability to create acceptable returns on projects a main barrier to decarbonization. Their concerns are based on customers’ unwillingness to pay—not universal, but enough to make it hard to scale low-carbon businesses. So they look to government policy and regulatory support to help bridge the gap.

Regional perspectives

While government policy and permitting remain the predominant roadblocks to the growth of new, low-carbon businesses in the sector, Bain’s survey reveals regional nuances. For example, almost twice as many European oil and gas executives blamed policy uncertainty for delayed investment decisions, compared with the previous year (61% vs. 36% in 2022), while fewer executives in North America assigned similar blame (50% vs. 59%), possibly showing the effects of the IRA. North American businesses, particularly, are expecting to grow their investments in new growth areas this year, a likely result of recent government policy changes.

While North American and European utilities executives are most concerned about permitting; executives in Asia-Pacific see technology as a top barrier.

Critical technologies

Renewables, artificial intelligence (AI) and other digital technology, and energy storage are the most critical technologies for the sector through 2030. Executives in the Middle East are bullish on hydrogen and carbon capture, but executives in most other regions expect these technologies to become more important only after 2030.

Searching for frontline and tech talent

Building organizational capabilities and finding talent remain major challenges for growing low-carbon businesses. Digital and information technology talent is at a premium in all sectors and regions. About 60% of executives expect digital and AI technologies to change their businesses significantly by 2030, but they’re struggling to find talent that can help them manage the change. In addition, about one in three companies report difficulty finding the engineers they need, and one in four are having trouble hiring frontline workers, especially in North America.

Talent is the top roadblock to scaling growth businesses in the Middle East, where 42% of companies have difficulty finding frontline workers and 33% have trouble finding sales and marketing talent. The market for frontline workers appears much more favorable in Latin America and Asia.

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Katie Ware (New York) — Email: katie.ware@bain.com