It is vital to identify the opportunities associated with a transition to a more sustainable planet, as well as mitigate the risks. With the theme of this year’s Earth Day, “Invest in our planet,” it is a timely reminder that international policy is accelerating to support green investments, even though more global collaboration and policy clarity is urgently required. To be effective stewards of client assets, we believe portfolios should be managed to be aligned with real economy transition pathways, which rely on mobilising capital at scale to the regions and sectors which most urgently need it.
We estimate investment of around US$100 trillion is needed to ‘green’ the world’s capital stock but clear signals from the Inflation Reduction Act in the US and Net Zero Industry Act in Europe are helping to deliver steps towards those goals. Subsidies to support the electrification of the energy system, build out of renewables, green hydrogen and carbon capture and storage (CCS) are helping identify new investment opportunities across multiple sectors. However, coordination globally is vital to ensure the most efficient scaling and location of green supply chains; to remove barriers to innovation for new technologies; to ensure better pricing of externalities such as carbon and methane; and to protect against any unintended consequences from fragmented policy action.
Kristina Church, head of responsible strategy, BNY Mellon Investment Management.
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