Low Carbon Economy: Century’s Biggest Business Opportunity

The world is vastly underestimating the benefits of acting on climate change. Tackling climate change could unlock a $23tn (￡16tn) investment opportunity by 2030 in emerging markets alone, according to 2017 report by International Finance Corporation. Meanwhile, in the US, renewable energy is creating jobs twice as fast as any other industry. And this is just the tip of the proverbial iceberg. This ground-breaking research, produced by the Global Commission and more than 200 experts, highlights proof points of the global shift to a low-carbon economy and identifies ways to accelerate action in five sectors: energy, cities, food and land use, water and industry.

Sustainability is now a mainstream business concern and leading companies all over the world recognise the opportunity and the imperative of being part of the solution. They are positioning themselves to thrive in the new green economy by setting emissions reduction targets in line with what science says is required to prevent dangerous climate change.

System transformation

The scale of the climate challenge requires nothing less than the wholesale transformation of the global economy. 

Ultimately all companies need to build science-based targets into their business models. We need systemic change, not to merely outsource pollution and risk from one company, sector or country to another.

This change can be triggered when there is concerted social and policy pressure, affordable alternatives and companies ready to seize the business opportunity. Climate change is an engine of innovation in capital markets, as the dramatic fall in renewable energy costs and strengthening policies are now demonstrating. 

Leading companies recognise that long-term holistic thinking is needed for future resilience. Kellogg company says that part of their motivation to set a science-based target is that climate impacts pose a risk to agricultural production of their raw ingredients.

The next 2-3 years are a critical window when many of the policy and investment decisions that shape the next 10-15 years will be taken. Business and finances need to prioritize urgent action on four fronts.

1) Ramp up efforts on carbon pricing and move toward mandatory disclosure of climate-related financial risks.

Accelerating efforts to disclose climate-related financial risks is essential to deliver radical transparency and shift much-needed finance toward low-carbon solutions.

2) Accelerate investment in sustainable infrastructure.

Ensuring that infrastructure investments are sustainable is critical. The G20 should continue its work to develop infrastructure as an investment asset class to improve the mobilization of private and long-term finance. Multilateral development banks should double their collective investment in infrastructure.

3) Harness the power of the private sector and unleash innovation.

By 2020, all Fortune 500 companies should establish emissions-reduction targets in line with what scientists say is necessary to prevent the worst climate impacts. A big push on innovation is needed, such as on deforestation-free supply chains or net-energy positive commercial buildings.

4) Build a people-centred approach that shares gains equitably and ensures that the transition is just.

All governments should establish clear Energy Transition Plans to reach net-zero energy systems. Women will play a critical role in this agenda. Ensuring their full participation in the economy could boost global GDP by as much as $28 trillion per year by 2025

A greater focus on adaptation and resilience across efforts and policies is critical as climate impacts continue to negatively affect lives and livelihoods. We can no longer choose between actions for today and those for tomorrow.

The Future We Want

The world is in a race to limit climate change

Leaders are already seizing the exciting economic and market opportunities of this new growth approach. The laggards are not only missing out on these opportunities; they’re putting us all at greater risk.

We can deliver on the promise of this new growth era. We can eliminate extreme poverty, prevent dangerous climate change, and improve the lives and livelihoods of millions but only if we set out to do so decisively now.

While COVID-19 and its economic repercussions are rightfully the primary focus of many governments today, as we look to boost the economy, we also need to consider tomorrow. For countries looking to shore up their economies in turbulent times and achieve long-term sustainable growth, climate action offers a compelling opportunity.