Capital IdeasTM
Investment insights from Capital Group
Equity
Matt Reynolds
On 4 November 2016, 196 parties came together at the United Nations Climate Change Conference (COP21) to sign the Paris Agreement - a legally binding international treaty on climate change. Hailed as a monumental milestone for humanity’s battle against climate change, a key objective of the agreement was to reduce greenhouse gas emissions by 45% in 2030 (interim goal) and reach net zero by 2050.
But despite vast amounts of money funnelled into shifting towards a low-carbon future, with a record US$1.8 trillion spent in 2023 alone, achieving the 2030 goals will require annual global investments to average US$5.4 trillion from 2024 to 2030, essentially tripling the current pace1.
If governments stay dedicated to attaining net zero emissions, the significant capital investment required to bridge the energy transition spending gap could revolutionise companies and investors alike.
This paper analyses how the energy transition cuts across multiple facets of the global economy and why it is important for investors to look beyond the obvious beneficiaries as both ‘new’ and ‘old’ economy companies can potentially benefit from this powerful wave of change.
2023 energy transition investment versus required annual levels
Data as at end 2023. Source: Bloomberg NEF. Note: Future values are obtained from the New Energy Outlook 2022, except electrified transport, which is from the Electric Vehicle Outlook 2023 Net-Zero Scenario. The 2023 figure excludes investment and spending for clean shipping and fuel cell vehicles.
1. Energy Transition Investment Trends 2024. Source: Bloomberg NEF
Our latest insights
-
-
Fixed Income
-
Global Equities
-
-
RELATED INSIGHTS
Past results are not predictive of results in future periods. It is not possible to invest directly in an index, which is unmanaged. The value of investments and income from them can go down as well as up and you may lose some or all of your initial investment. This information is not intended to provide investment, tax or other advice, or to be a solicitation to buy or sell any securities.
Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. All information is as at the date indicated unless otherwise stated. Some information may have been obtained from third parties, and as such the reliability of that information is not guaranteed.
Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.