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Climate change growth could be worth USD 26 trillion

Climate change growth could be worth USD 26 trillion

01-11-2018 | Spannende Zahlen

Investing to limit climate change could add USD 26 trillion to the global economy, a new report says.

The study by the Global Commission on the Economy and Climate says the money can be generated in five key economic systems: energy, cities, food and land use, water and industry. It has analyzed the revenue-generating potential of a number of areas such as renewable energy and the introduction of carbon pricing, combined with the savings from avoiding the damage caused by global warming.

The Commission is an initiative set up by seven coastal countries – Colombia, Ethiopia, Indonesia, Norway, South Korea, Sweden and the UK – and is chaired by the former president of Mexico. Its flagship project is the New Climate Economy, a think tank which aims to provide independent advice on how countries can achieve economic growth while dealing with the risks posed by global warming.

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What has happened

The 2018 report identifies and quantifies areas in which tackling climate change can actually raise and save money. Its recommendations based on detailed studies include:

  • Creating over 65 million new low-carbon jobs by 2030, equivalent to the current population of the UK.
  • Raising USD 2.8 trillion from the introduction of carbon pricing, equivalent to the current GDP of India.
  • Avoiding trillions in weather-related losses; 2017 cost USD 320 billion in storm damage alone.

Why is it important

Making a clear case that following environmental, social and governance (ESG) principles does not cost performance or GDP growth but can actually enhance it – while simultaneously improving the planet – has become a core tenet of sustainability investing.

While restructuring long-standing infrastructure to create a low-carbon economy does cost money, quantifying its future financial benefits aids the political case, particularly as populous and powerful countries such as the US, China and India are reluctant to dump fossil fuels.

And the pressure is growing to limit global warming under the Paris Agreement to 1.5 degrees Celsius by 2100. On October 8, a report by the United Nations Intergovernmental Panel on Climate Change warned that this target would probably be reached by 2030, and that global warming of 3 degrees by the end of this century was more likely.

What does it mean for investors

“It is becoming more and more clear that investment in sustainable infrastructure is the growth story of the future,” says Robeco Chief Economist Léon Cornelissen. “Public investment is important, especially in developing countries, but the role of private investment is non-negligible, especially in advanced economies.”

“As infrastructure currently represents only a small percentage in the portfolio of institutional investors, there is ample scope for expansion. Infrastructure could offer long-term, stable cash flows and act as an attractive diversifier in investment portfolios.”

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