With the UN climate change conference – COP26 – continuing this week in Glasgow, it’s obvious that there is consensus among a majority of world leaders and key stakeholders that a lot needs to be done, if the ambition of keeping global warming to a 1.5-degree increase is to have any chance of being met. It is here that advanced technologies have a critical role to stopping climate change.
The drive to develop and scale these technologies is accelerating. According to a new McKinsey research climate technologies, if deployed widely, deliver about 60 percent of the emissions abatement that will be needed to stabilize the climate by 2050. However, the market for climate technologies is not quite ready, in the sense that 25 to 30 percent from technologies that are demonstrated but not yet mature and another 10% to 15% from those still in R&D.
Yet there are reasons to be optimistic. Recent history suggests that researchers and businesses can deliver the necessary advances and cost reductions.
Researchers said, over the past decade, the cost of some renewable-energy projects came down by almost 90 percent, as did the costs of electric-vehicle (EV) batteries, LED lighting, and other energy-efficient hardware. Capital is increasingly plentiful, evidenced by the revaluation of cleantech stocks that began in June 2020, and by the growth in investments earmarked for sustainability and environmental, social, and corporate governance (ESG) objectives.
Governments are lending strong fiscal support to low-carbon innovation. Pledges from big companies not only to cut emissions but also to decarbonize operations and product lines—to buy only renewable fuel or make only EVs—give confidence to entrepreneurs and their backers. Talk of regulatory mandates lends weight to these demand signals.
The need for climate technology is vast—which creates large potential markets and investment opportunities. Our estimates suggest that next-generation technologies could attract $1.5 trillion to $2 trillion of capital investment per year by 2025.1 To enter these markets and navigate them successfully, established companies, start-ups, and investors will need a nuanced and ever-evolving understanding of technical advances, customer demands and commitments, and policy environments. In this article, we lay out five areas with considerable promise, along with potential obstacles along the path to scale:
McKinsey researchers identified five themes that could attract $2 trillion of annual investment by 2025.
- Electrifying transportation, buildings, and industry
- Launching the next green revolution in agriculture
- Remaking the power grid to supply clean electricity
- Delivering on the promise of hydrogen
- Expanding carbon capture, use, and storage
Bill Gates wrote in the Financial Times that one of his top priorities at COP is making sure that the world prioritizes scaling clean technology innovation. If we’re going to avoid the worst effects of a climate disaster, it’s not enough to invent zero-carbon alternatives—we need to make sure they’re affordable and accessible enough for people all over the world to use them.
Tina Nybo Jensen, International Policy Manager, GRI believes that responding to the global climate crisis demands a global response, with public commitments backed up by resources and collaboration. We cannot have countries or organizations working in silos. And we cannot de-couple climate considerations from the broader sustainability agenda, as exemplified by the Sustainable Development Goals – and SDG 13 (climate action), in particular.
Encouragingly, the Climate Confidence Barometer, published in September by WBCSD and FREUDS, highlights that 98% of companies surveyed reported confidence that they will meet net-zero targets by 2050. In addition, 55% are confident that the global business community will do so as well.
However, the transition does not stop at emissions; as identified in a recent report from the Future of Sustainable Data Alliance, there is a ‘ESG data hole’ when it comes to biodiversity and nature. KPMG research from December 2020 also found that less than a quarter of large companies at risk from biodiversity loss disclose on the topic. In this context, GRI’s plans to launch a new Biodiversity Standard in 2022 are timely and much needed, while October’s UN Biodiversity Conference set the stage for work to resume next year to adopt a post-2020 global biodiversity framework.
