so that the Paris Agreement and the net zero emissions targets by 2050 are met, the climate investments should be done as soon as possible and on a larger scale.
This is what the new study by the Swiss Re Institute reveals – a global provider of reinsurance, insurance and other forms of risk transfer – monitoring progress in the decarbonization of economy.
Comparing the investments needed to achieve net-zero emissions with the expenditures made so far shows a climate investment gap of more than $270 trillion in the energy, transport, construction and industry sectors between 2022 and 2050.
Linked to this, one in seven funds classified as sustainable has a higher-than-average carbon emissions intensity across all investment funds, and no climate-marked fund has a portfolio that is fully in line with the Paris Agreement target. .
The climate investment gap spans the four main carbon-emitting sectors: energy, transport, construction and industry, the study reveals.
The window towards net zero emission targets is in the transport sector, estimated at $114 trillion, with most of the investment needed to equip roads for electric vehicles.
It is worth remembering that, in general terms, net zero emissions can be achieved by removing both greenhouse gas and emissions from the atmosphere, so that the net amount added is zero.
In the energy sector, the forecast gap is $78 trillion, with the main shortfall in renewable energy.
The construction and industrial sectors require investments estimated at US$65 trillion and US$14 trillion, respectively, with energy efficiency being the main driver of decarbonization for both sectors.
zero net savings
The study also identifies that, if investments made year by year were gradually and consistently raised beyond the annual growth trend, the gap could close by mid-century.
For Swiss Re’s Group Chief Economist, Jérôme Haegeli, “To put the new climate investment gap number in perspective, the reality is: if decarbonization investments continue to grow at the current rate, the 2050 target will likely be missed in 20 years”.
This could be achieved by increasingly aligning current capital expenditures with net zero emission targets. “Identifying the climate investment gap makes it possible to track annual progress towards net zero savings,” says the executive.
According to the survey, most of this investment needs to come from the private sector.
The public sector, on the other hand, needs to create the framework for the private sector to redirect existing capital to climate investments. “Change can only happen at the necessary pace if the public and private sectors work in coordination to unlock capital and channel it in a targeted way,” says Haegeli.
In addition to direct public investment in green projects, governments need to build trust in key markets with a clear policy framework and incentives, while financial regulators must establish standardized rules to enforce targets.
the green transition
Given the long-term scenario of their obligations and long-term capital to be committed, institutional investors, such as pension funds or insurance companies, are well positioned to play a role in the green transition. Swiss Re Institute.
For example, the insurance industry could drive the market by funding emerging decarbonization solutions such as carbon capture and removal technologies and investments in sustainable infrastructure.
As a risk absorber, the industry could improve the risk return profile of favorable investment projects. climate.
By pricing risks and sharing expertise about them, the industry could enable market participants to make clear and informed investment decisions.
“In fact, the green bond market still represents less than 5% of the global market value, which means it is very small. Stronger action is needed to reduce investment barriers and international convergence on the taxonomy for climate and green investments,” says Haegeli.
Follow Money Times on Instagram!
Connect with the market and have access to exclusive content about the news that enrich your day! Seven days a week and 24 hours a day, you will have access to the most important and commented topics of the moment. And even better, multimedia content with images, videos and a lot of interactivity, such as: the summary of the main news of the day in Minuto Money Times, Money Times Responds, in which our journalists answer questions about investments and market trends, lives and much more most… Click here and follow our profile now!