Taking action on climate isn’t just good for the planet—it’s increasingly good for business. According to CDP’s landmark 2025 Disclosure Dividend report, companies that actively measure and manage their environmental risks are unlocking major financial gains. In 2024 alone, companies that identified environmental opportunities generated an impressive $4.4 trillion in value, with another $13.2 trillion in potential still on the table.
But here’s the real story: For every $1 invested in addressing physical climate risks, some companies are seeing up to $21 in returns, with an average return of up to $7. That’s not just a disclosure dividend—it’s a climate innovation goldmine.
If your company is developing the technologies that will drive our clean energy future, there’s more good news: R&D tax credits can help fund this essential work.
The Climate Innovation Imperative
The numbers are clear: environmental risk is financial risk, and the costs are rising fast. Ignoring these risks could cost the global economy up to $38 trillion by 2050—over a third of projected global GDP.
Companies are already feeling the impact. Cocoa prices have hit record highs due to extreme weather in West Africa, which produces 80% of the world’s cocoa. In Taiwan, droughts have shut down semiconductor plants and forced companies to truck in water. In the United States, insurance premiums have doubled since 2017 due to soaring climate disaster costs and increased federal aid.
But forward-thinking companies aren’t just managing climate risks—they’re innovating to seize new opportunities. That’s where R&D tax credits come in.
Where Innovation Meets Incentives
The beauty of climate innovation is that it often qualifies for substantial R&D tax credits. Whether you’re developing next-gen batteries, improving solar panel efficiency, or designing smart grid systems, your climate-focused R&D could unlock significant tax savings.
Here’s what climate innovators need to know about R&D tax credits:
The Four-Part Qualifying Test
Your climate innovation projects likely qualify if they meet these criteria:
- Purpose: You’re creating or improving products, processes, or techniques related to sustainability, energy efficiency, or emissions reduction
- Technical nature: The work involves engineering, chemistry, physics, or other hard sciences
- Uncertainty elimination: You’re working to resolve technical challenges or unknowns
- Experimentation process: Your team is testing, modeling, or prototyping solutions
Climate Innovation That Often Qualifies
The range of eligible activities is broader than many companies realize:
- Clean energy technologies: Improving solar panel efficiency, optimizing wind turbine design, and developing energy storage solutions
- Carbon capture and reduction: Creating technology to capture carbon emissions or reduce greenhouse gases is essential. These projects are key to fighting climate change and qualify for R&D tax credits
- Smart grid technology: Innovations that boost the reliability and efficiency of electrical grids qualify. Integrating renewables into the grid is a major part of this
- Sustainable materials: Researching eco-friendly alternatives for manufacturing, construction, or packaging
- Environmental cleanup tech: Developing new water purification or air pollution control technologies qualifies. Both new inventions and major upgrades to existing systems count
- Green building innovations: Energy-efficient HVAC systems, smart building controls, and sustainable construction materials
Maximizing Your Climate R&D Credits
United States: Federal and State Opportunities
The federal R&D tax credit can cover up to 20% of qualifying expenses, including employee wages, supplies, contract research, and patent costs. But that’s just the start—many states offer additional R&D incentives that can be combined with federal benefits.
The Inflation Reduction Act has also created new opportunities, raising the maximum credit for capturing and sequestering carbon oxide from $50 per metric ton to $85 per metric ton (and $180 per metric ton for carbon dioxide captured using direct air capture technology). For companies working on carbon capture, this is a major boost to the financial case for innovation.
Canada: SR&ED and Beyond
Canada’s Scientific Research and Experimental Development (SR&ED) program is especially generous for climate innovation. The program offers:
- Up to 35% refundable tax credits for eligible small businesses
- Up to 15% non-refundable tax credits for larger companies
- Enhanced rates for Canadian-controlled private corporations
Canadian companies are already seizing the climate opportunity: Based on median values, Canadian firms identified $72 million in potential gains per company from environmental opportunities—among the highest in the world.
Beyond the Credits: Building Climate Resilience
The CDP report shows that successful climate action goes beyond individual projects—it requires a systematic approach. Over 90% of large companies already have, or plan to have within two years, a process for identifying and assessing their environmental dependencies, impacts, risks, and opportunities.
Here’s how leading companies are tackling climate innovation:
Supply Chain Integration: On average, 75% of a company’s emissions come from its suppliers. Companies like Cellnex are using financial incentives to get suppliers involved in climate action—suppliers offered financial incentives are 52% more likely to cut their emissions than those just given training.
Strategic Investment Planning: The median company could unlock $33.1 million in opportunities for just $4.6 million in costs. Smart companies use R&D credits to bring those costs down even further.
Long-term Vision: Despite huge opportunities in the green economy, over half of companies don’t yet offer low-carbon or low-water impact products and services. That’s a massive first-mover advantage for those ready to invest in climate innovation now.
The Boast Advantage: Turning Climate Innovation into Tax Savings
At Boast, we’ve seen firsthand how R&D tax credits can accelerate climate innovation. Our clients in clean technology regularly recover 15–30% of their R&D investments through strategic credit optimization. That’s money that can be reinvested into the next breakthrough technology or scaled into commercial deployment.
Here’s how we help climate innovators maximize their returns:
Comprehensive Activity Identification: We work closely with your technical teams to identify every qualifying R&D activity—from early research to prototyping and process optimization.
Cross-Border Optimization: For companies operating in both the US and Canada, we make sure you maximize credits in both countries while avoiding double-dipping.
Strategic Planning: We help you structure your R&D activities to maximize credit eligibility and support your technical goals.
Documentation Excellence: We make sure your claims are audit-ready, with detailed technical documentation that clearly demonstrates your innovation and how you resolved technical uncertainties.
The Climate Innovation Imperative
The window for climate action is closing, but the business case has never been stronger. Companies that proactively address environmental risks and opportunities are now seeing major financial rewards.
For companies leading the way in climate innovation, R&D tax credits aren’t just a bonus—they’re a strategic tool to speed up the shift to a clean energy economy and build a lasting competitive edge.
The real question isn’t whether your climate innovation qualifies for R&D credits—it’s whether you’re claiming everything you’re entitled to.
Ready to turn your climate innovation into tax savings? Contact Boast today to find out how much your sustainability R&D could be worth. With the right strategy, your path to net zero could also be your path to significant tax relief.
