Governments, investors and corporates from around the world will have to stump up an estimated $100tn in green investment in order to reach net-zero emissions by 2050, research from BNY Mellon Investment Management has found.
The eye-watering level of funding, which represents 15% of total global investment over the next 30 years or 3% of cumulative GDP, is necessary, the $1.8tn manager warned in a joint report with Fathom Consulting, as the global economy is significantly behind schedule when it comes to reaching the goals set by the Paris Climate Accord.
Around one third of the total investment will need to come from Europe and the US, with the report noting businesses in the S&P 500 alone will need to commit roughly $12tn to green capital expenditure over the next 30 years to remain on course.
Emerging market countries, which are the most vulnerable to the devastating effects of climate change, will have to come up with more than half the $100tn.
China needs more green investment than any other country, according to the report, due to the fact it accounts for more than 15% of global GDP and is expected to grow faster than most economies between now and 2050. It is currently the world’s biggest polluter, with a higher-than-average share of its electricity production derived from fossil fuels and an above-average CO2 intensity of GDP.
The energy and utilities sectors, which face the largest climate transition challenges, will require the bulk of new green investment.
The report estimates energy companies in the S&P 500 will need $3.1tn to transition, while utilities firms will need $2.4tn, despite their combined market capitalisation making up just 6% of the total index. By comparison, US tech companies, which make up a quarter of the index, will need $418bn.
“Investment is just one side of the coin. Wider policy action is needed to accelerate the pace of decarbonisation,” said Shamik Dhar, chief economist at BNY Mellon’s fund arm and one of the co-authors of the report.
Credit : https://www.fnlondon.com