investment viewpoints

    The G7’s global green industrial revolution

    The G7’s global green industrial revolution

    The first ever ‘net-zero G7’ saw world leaders commit to achieving carbon neutrality by 2050, while underscoring the pivotal role private investment will be required to play in the transition.  

    The seven members (Canada, France, Germany, Italy, Japan, the United Kingdom and the United States) have also pledged to almost halve their emissions by 2030 relative to 2010. The pledges came as part of a wider commitment to a green revolution, in response to the “unprecedented crises” of climate change and biodiversity loss.

    Climate change is recognised as one key driver of biodiversity loss, and protecting, conserving and restoring biodiversity is said to be crucial to addressing climate change.

     

    Prevention and adaptation

    The net-zero pledge is essential to achieving the goals of the Paris Agreement and keeping the 1.5°C global warming threshold within reach. To exceed the threshold is to risk enormous human and economic costs. The Intergovernmental Panel on Climate Change (IPCC) has estimated the economic damage from even a 1.5°C change would amount to as much as USD 54 trillion, rising to USD 69 trillion if temperatures were to reach 2°C.      

    In addition to cutting emissions, G7 leaders also emphasised the importance of increasing adaptation action worldwide. Adaptation efforts serve to protect people and limit the adverse effects of climate change, for instance by strengthening critical infrastructure. G7 nations committed to submitting adaptation communications before COP26 in November, if feasible.

     

    Climate opportunities

    The kind of global green industrial revolution envisioned by the G7 offers arguably one of the greatest economic opportunities of our time and requires trillions of dollars of private-sector finance. 

    We estimate that to meet a 2°C scenario, infrastructure investment will need to increase to USD 5.5 tn per year over the period to 2030, and to USD 7.2 tn per year over the period from 2030 to 2040. This presents close to a USD 100 tn infrastructure opportunity. There is a significant growth opportunity for companies across multiple sectors that embrace the transition, either by providing solutions to adapt to a climate damaged and carbon-constrained world, or by re-positioning themselves to generate competitive advantage.

    The climate transition stands to create significant investment opportunities across multiple sectors and some will exert a greater impact than others. G7 leaders have committed to prioritising the most urgent and polluting sectors and activities, including the energy, transport, industrial sectors, homes and buildings, and agriculture, forestry and other land-use industries. 

    The leaders of the G7 have confirmed plans for a green revolution that cuts emissions to net zero by 2050 and seeks to limit the rise in global temperatures to 1.5°C. Net zero creates both risks and opportunities that investors must recognise and respond to, in our view.

     

    Climate transition with LOIM

    Increasing physical manifestations of an already damaged climate draw stark attention to the scale, scope and urgency of a climate transition.

    Our Climate Transition strategy invests in companies across all sectors that we believe may benefit from the transition to a carbon-constrained world and the adaptation to a carbon-damaged world.

    Solution providers, transition candidates from hard-to-abate sectors, and adaptation leaders are incorporated into a high-conviction global equity portfolio of 40-50 stocks that fully captures the cross-sector opportunity.

    Learn more here.

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