Temasek and BCG Report Says AI Could Create US$600 Billion Annual Climate and Sustainability Opportunity by 2028

SINGAPORE, May 19, 2026 – Artificial intelligence is rapidly emerging as one of the most commercially significant forces shaping the global sustainability and transition economy, with a new report by Temasek and Boston Consulting Group estimating that AI-enabled climate and sustainability sectors could generate up to US$600 billion in annual value globally by 2028.

Released during Ecosperity Week 2026 in Singapore, the report argues that AI is expanding far beyond traditional automation and productivity applications into areas including industrial optimisation, climate risk analytics, energy infrastructure, insurance, education and resource management.

The report frames AI not only as a technology trend, but as a major investment and infrastructure opportunity capable of simultaneously improving business performance and sustainability outcomes.

“We estimate that deploying current AI capabilities across climate and sustainability sectors could generate approximately US$600 billion globally in annual value,” the report states.

The estimate is based on analysis across more than 40 subsectors spanning climate and energy transition, natural capital management and social systems.

Industrial AI Represents Largest Investment Opportunity

The report identifies industrial equipment and systems efficiency as the largest AI-enabled climate investment opportunity, accounting for an estimated US$300 billion in annual value potential by 2028. Industrial sectors including cement, steel, chemicals and food manufacturing are increasingly deploying AI systems for predictive maintenance, energy optimisation, quality control and operational efficiency.

The report argues that these sectors are especially attractive because AI-driven reductions in energy consumption and material waste directly improve both margins and sustainability performance.

Examples cited include AI deployments capable of reducing industrial emissions by approximately 0.6 gigatons annually while also lowering downtime, maintenance costs and workplace injuries.

Japan’s Tokuyama Cement, for example, achieved a 3 per cent reduction in thermal energy consumption using ABB’s AI-enabled optimisation platform.

The report also highlights predictive maintenance platforms as a particularly attractive investment category.

One cement manufacturer deploying Nanoprecise’s MachineDoctor AI sensors reportedly avoided a catastrophic gearbox failure and more than US$500,000 in costs through early anomaly detection.

According to the report, AI-native climate and industrial solution providers are increasingly attracting venture capital, growth equity and buyout interest as investors look for scalable infrastructure-linked AI applications.

Climate Risk Analytics and AI-Driven Insurance Emerging as High-Growth Segments

Another major business opportunity identified in the report is AI-enabled climate risk modelling and insurance analytics, estimated to represent approximately US$75 billion in annual value by 2028.

The report notes that climate-related natural disasters, infrastructure disruption and insurance losses are creating strong commercial demand for more sophisticated predictive systems.

AI platforms are increasingly combining satellite imagery, sensor networks, atmospheric modelling and computer vision to create hyperlocal risk assessments for insurers, utilities, logistics operators and asset owners.

The report cites deployments where AI-enabled underwriting platforms improved insurance profitability metrics while also expanding coverage availability in climate-exposed markets.

Investment activity in the sector is also accelerating. The report references transactions including Thoma Bravo’s AUD1 billion acquisition of Nearmap and major funding rounds for climate intelligence firms such as Tomorrow.io.

The report suggests that AI-enabled climate risk analytics could become increasingly important for insurers, infrastructure investors, real estate owners and financial institutions as disclosure expectations and climate-related operational risks intensify globally.

Grid Infrastructure and AI-Orchestrated Energy Systems Attract Investor Attention

The report also identifies electricity grid orchestration, energy storage and virtual power plants as emerging strategic investment sectors. AI-enabled grid and storage management applications are projected to create around US$32 billion in annual value by 2028.

The report argues that AI is increasingly reshaping the economics of infrastructure assets by improving dispatch efficiency, reducing congestion and optimising existing energy systems without requiring equivalent capital expenditure on new infrastructure.

Applications highlighted include:
• predictive grid maintenance
• dynamic line ratings
• AI-enabled virtual power plants
• battery dispatch optimisation
• grid congestion management

Battery fleets using AI-driven dispatch optimisation reportedly generated 25 to 30 per cent higher revenues from the same installed hardware base.

The report also points to growing convergence between AI infrastructure and energy systems, including emerging “flexible AI factory” models where data centres dynamically adjust computational loads based on electricity grid conditions.

Private Capital Expands Beyond Traditional Climate Tech

A central theme throughout the report is that AI is broadening the definition of climate and sustainability investing. Rather than limiting climate investment to renewable energy and carbon reduction technologies, the report argues that AI is making entirely new sectors investable by improving operational efficiency, risk management and measurable sustainability outcomes.

The report categorises opportunities across venture capital, growth equity, buyout and infrastructure investment strategies depending on AI maturity, commercial traction and asset characteristics.

Importantly, the report argues that much of the economic value generated by AI adoption will accrue not only to software providers, but also to asset owners and businesses deploying AI systems.

“The most defensible positions often sit with companies that control data and distribution, not just the AI layer,” the report states.

The report also cautions that AI’s own electricity and resource demands will require careful management as hyperscale computing infrastructure expands globally.

Nevertheless, the study concludes that AI-driven resource optimisation across industrial systems, infrastructure, insurance, energy and sustainability sectors is likely to create one of the most significant private capital opportunities of the decade.