To keep global warming within 1.5°C, trillions of dollars more will need to be invested in clean energy production and infrastructure every year from now until 2050. While most of that will have to come from the private sector, governments must act as the seed funders and market makers.
BERKELEY – As we mark the 52nd Earth Day, we must recognize that achieving net-zero carbon dioxide emissions by 2050 will require significant investment to finance the necessary economic and social transitions. McKinsey estimates that this will take $9.2 trillion of annual global investment over the next 30 years – an increase of $3.5 trillion per year from what is spent today on clean, renewable energy.
Most of these investments will come from the private sector, which is already leading the charge. The value of assets under management with net-zero commitments is now $57 trillion. The 450 members of the Glasgow Financial Alliance for Net Zero, representing more than $130 trillion in assets, have pledged to align their portfolios with the Paris climate agreement’s 1.5° Celsius warming target. The First Movers Coalition (whose founding members include companies like Amazon, Apple, Boeing, Trane, and Volvo) has pledged to create demand for early-stage clean technologies in “hard-to-abate” sectors like steel, cement, and aviation. In the United States alone, private investment in clean-energy assets reached a record $105 billion in 2021, 11% higher than in 2020 and up 70% over the previous five years.
Moreover, last fall, the International Financial Reporting Standards Foundation created a new International Sustainability Standards Board to develop industry-specific climate disclosure guidelines that will build on reporting standards developed by the Sustainability Accounting Standards Board. By the end of 2021, 258 institutional investors, representing $76 trillion in assets, had adopted the SASB’s voluntary standards. And, in a significant policy move, the US Securities and Exchange Commission recently proposed new rules that would require public companies to disclose information about their carbon emissions and their plans for addressing climate-related real asset and transition risks.