Some key statistics on risk and investment trends

As Egypt hosts the most important sustainable development event of the year, COP27, the Middle Eastern country is doing all it can to host the summit on implementing decarbonization versus climate commitments . However, given the weak global economy, high inflation and geopolitical instability, we should not expect many breakthroughs at this year’s summit. The more than 100 participating countries will negotiate the creation of the Damage and Loss Fund (a fund to finance damage and loss suffered by the most vulnerable countries), as well as the annual investment commitment of 100 billion dollars for developing countries to address their climate adaptation and mitigation priorities. No one expects much progress on both fronts given the limited political capital of the biggest polluting countries as well as little fiscal space to close the climate finance gap.

While the near-term climate dynamics may not look so positive, it is also important to look at the positives, including the current market pull, capital market investments and early-stage innovation taking place. produce in sustainable development. Here are some data points highlighting near-term risk and strong sustainability momentum, regardless of politics and economics:

Climate risk data

  • Under the 1.5 C Net-Zero plans, nearly $30 trillion is to be invested by 2050. This equates to about 4% of annual GDP (in 2021 money).
  • The cost of unmanaged and unpredictable climate change would be much higher, as climatic events would affect around 20% of global GDP by 2040.
  • According to Swiss-Re, by 2050, climate change could lead to $23 trillion in global GDP losses, which corresponds to 11-14% of global GDP.
  • The United Nations estimates that the remaining global CO2 budget to stay within 1.5°C of global warming (the scenarios that would prevent a catastrophic climate tipping point) is 400 billion tonnes of CO2. This budget is set to run out in 2030 unless decarbonization accelerates and we meet Net-Zero targets.

Data on sustainable investments

  • There are currently 43 billion-plus private climate tech companies in the global 1000 unicorn club (energy, mobility and agribusiness are the top sectors to watch). These green startups grow faster than their traditional competitors and take an average of 4 years to reach Unicorn status, compared to 7 years.
  • Green tech valuations were very high in 2021, outpacing the general market, with a 625% growth rate of newly launched green tech unicorns compared to the industry benchmark growth of 287%.
  • Assets under management are expected to reach $41 trillion by the end of 2022 according to Bloomberg, and growth will come primarily from the US and EU, where regulation is catching up fast. Total environmental, social and governance (ESG) investments are expected to reach $50 trillion by 2025. This means that for every $3 invested, $1 will be invested in ESG globally.
  • Growing demand for net zero services and technologies is accelerating and could generate more than $12 trillion in annual sales by 2030 with key leading sectors including transportation (Mckinsey).
  • In 2021, green tech companies attracted over $1 trillion in investment. The planned global investment in sustainable development by 2025 is $5 trillion per year.
  • In 2002, the Davos First Mover Coalition (FMC) expanded its Green Transformation Partnership to over 55 large companies that began purchasing billions of dollars worth of decarbonization technologies to scale up “early adoption” of green technologies.
  • Sustainable investments are strongly focused on the “low-hanging fruits” of decarbonization, in sectors that have lagged behind in terms of climate innovation such as energy (35%), agriculture (33%) and transport and mobility (16%). . In geographical terms, most unicorns are based in the United States and Europe, where venture capital funds are abundant.

conclusion

The transition to green growth is underway and there is strong data supporting this trend, regardless of policy. While in Europe there is a “top-down” trend driven by regulation and policy, in the US it is a “bottom-up” trend, with the private sector and capital markets leading. Regardless of election cycles, poor market conditions and regulation, market participants believe there are great business opportunities around decarbonization and sustainability. We must continue to expect large inflows of capital to fuel innovation and the jobs of the future, as sustainability becomes a value creator and risk reduction measure across all sectors.