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Risky Transition?

Opportunities and risks may be created depending if US$100 trillion investment is invested under a net zero scenario or business as usual.

The firms which profit most from the transition will not necessarily be the ones making the most of green investment. The sectors that need most of the investment to achieve net zero by 2050, are, it seems, at least in part, being shunned by some investors for the very same reasons.

Not everyone agrees how much capital spending will be required to ‘green’ the world. It is complicated by things such as technological progress and the fact there is no consensus on precisely what should be considered ‘green’ investment. For example, if industrial-scale lithium-ion batteries become the primary source of electricity storage, much of the gas infrastructure would be rendered useless and scrapped, resulting in a different level of investment to reach net zero. Likewise, the ability to use existing aircraft will depend on which low-carbon aviation technology becomes established.

Some corporates must either absorb significant losses or will need to be compensated for these necessary losses. This is the greatest challenge in meeting the Paris climate goal. Our analysis also shows the amount of assets that are stranded rises the longer the transition gets delayed.

Shamik Dhar, chief economist at BNY Mellon Investment Management and co-author of the report, An investor’s guide to net zero by 2050.


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