It’s (again) time to speed climate action, the IPCC’s latest report finds

While global investment in transitioning to a clean-energy economy is three to six times lower than levels needed this decade, there is enough capital and liquidity to close the gaps provided nations move much faster to confront climate change, the United Nations’ Intergovernmental Panel on Climate Change said in a report published Monday that details developments in reducing and mitigating global greenhouse gas emissions.?

The report finds that “averting the worst impacts of a warming climate would require global greenhouse gas emissions to peak by 2025 at the latest, be slashed 43% by 2030 and hit net-zero by 2050,” says Sylvain Vanston, MSCI’s executive director for climate change research. “This is the radical pace of climate neutrality.”??

Vanston spoke with MSCI Communications about some of the takeaways for investors.??

The IPCC finds that we need to accelerate efforts to reduce emissions. What’s at stake for investors??

Vanston: The report underscores in several respects that when it comes to aligning with net-zero, the sooner the better. As the director of the UN Environment Programme noted on Monday, a young person who starts a retirement account today needs to know that it has the potential to pay out when they reach retirement age, by which time our response to the existential threat that climate change presents will have long been decided.?

What are some areas for arresting climate change that the report addresses??

Vanston: The report documents the need for a major transformation of the energy and materials sectors by substantially reducing reliance on fossil fuels and introducing more electrification, and by reducing the emissions-intensity of production processes and manufacturing. It also shows that reaching net-zero will require decarbonizing every sector, from transportation and real estate to agriculture and farming. On a hopeful note, the report finds that we could cut greenhouse gas emissions by as much as 70% with policies, infrastructure and technology that enable us to shift to a less carbon-intensive lifestyle.?

What could be the role for carbon capture and storage???

Vanston: The IPCC finds that carbon capture and storage is unavoidable if we hope to achieve net-zero. But it notes that while such technologies would allow fossil fuels to remain in use longer and lessen the likelihood of stranded assets, carbon capture and sequestration itself faces technological, economic, environmental and other barriers, and has yet to be proved at scale. Until then, coal assets are at risk of being stranded this decade, while oil and gas assets face the risk of stranding in the two decades that follow. The report emphasizes, too, the critical need for conservation of forests and other ecosystems that absorb carbon naturally.?

What does the IPCC say about renewables???

Vanston: It takes stock of the falling cost of solar, wind and other forms of renewable energy — in some cases below the cost of fossil fuels — together with a strong increase in installed capacity. It also finds that the average annual rate of growth in global emissions has slowed in the last decade.?

What might investors do after reading this report, which highlights how little runway remains if we are to avert the worst climate impacts??

Vanston: Investors can help drive decarbonization of the global economy by allocating capital to companies they assess to be more resilient to climate change. This could begin with clear, concrete steps to decarbonize portfolios, and to integrate climate into risk management and investment strategies. It includes using shareholder engagement and voting to influence companies’ climate trajectories. If that fails, investors could consider reallocating assets away from climate laggards. It also includes advocating for policies that provide a clear incentive framework for net-zero. Ultimately, this is not about more regulation but about better regulation to level the playing field. We all know we need more low-carbon energy, but we also need policymakers who heed climate science.?

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Join MSCI on May 17 and 18 for our global “Capital for Climate Action” conference, which will bring together leaders to examine how investors are converting net-zero commitments to action. Learn more and register here .?

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