Sustainable Investing Decarbonizing the economy: From challenge to opportunity
Innovators lead the way
The consensus is clear: anthropogenic or man-made greenhouse gas emissions (GHG) are the main contributors to global warming. As global warming continues to disrupt weather patterns, extreme conditions risk becoming the new norm. Beyond the devastating environmental impact, climate change can also increase migration, poverty and conflict as land becomes less habitable.
To reduce global warming, many companies have begun to reassess how they do business. The companies that go even further, incorporating climate-related risk into their planning, are in fact better poised to perform and attract capital.
The most forward-thinking companies and entrepreneurs, however, are helping to drive the transition to a less carbon-intensive world economy. By focusing on the key sectors and activities most responsible for GHG emissions, they have turned the challenge of decarbonizing the economy into new opportunities for growth.
Focus area 1: Carbon-free electricity
The International Energy Agency (IEA) projects ever-stronger demand for electricity generation, particularly from emerging markets. Over the next 20 years, wind and solar power are set to become the most affordable sources of electricity in many countries. As a result, wind and solar are expected to provide nearly 40% of all electricity in 2040, compared to 6% in 2017.
Global power generation from coal is also anticipated to decline from 39% in 2017 to 5.5% by 2040. The companies that lead in renewable power generation and electricity storage will likely benefit from this shift. The IEA also estimates that the share of nuclear power generation will increase as emerging markets look for a reliable and competitive source of electricity to substitute energy generation from coal and lignite power plants.
Focus area 2: Sustainable transport
With approximately 23% of global energy-related emissions stemming from road, rail, air and water transport, it is no wonder these industries are under scrutiny. Positive developments include the electrification of engines and shift to more sustainable fuels and energy sources, including natural gas, biofuels and especially hydrogen, whose “unprecedented momentum” has been noted by the IEA. While hydrogen’s role in cutting carbon emissions – mainly from long-haul transport and the manufacturing of chemicals, iron and steel – appears promising, additional infrastructure investments and regulatory change are needed.
Above and beyond electric vehicles, the search for electrified air transport and cleaner sea freight transportation is on. The development of renewable energy solutions for the shipping industry, such as marine solar power panels to reduce a vessel's emissions, will continue to garner interest.