Climate change causes changes in temperature, precipitation patterns, and other factors that affect distribution and species richness, leading to biodiversity loss. Deforestation contributes to climate change by releasing carbon dioxide into the atmosphere, reducing biodiversity and contributing to soil erosion.
Climate change is also responsible for changing the availability and distribution of water resources, with some regions experiencing more frequent and severe droughts, floods and storms. This can lead to water shortages that affect agriculture, industry and human health.
Pollution is not only responsible for greenhouse gases, but also for health problems. In addition, the conversion of land for agriculture, development or other purposes can affect the carbon balance of ecosystems and lead to increased greenhouse gas emissions.
Aside from the willingness of various governments to regulate these impacts, preventing temperatures from rising less than 1.5°C above pre-industrial levels will require significant investment over the coming decades. Preventing temperatures from rising above these levels will require significant investment in the transition to a low-carbon economy and in reducing greenhouse gas emissions.
According to the Intergovernmental Panel on Climate Change (IPCC), in order to limit global warming to 1.5°C above pre-industrial levels, global CO2 emissions would need to decrease by about 45% by 2030 from 2010 levels and drop to zero around 2050.
The investments required to enable the transition of the real economy are significant. It is estimated that, by the end of the decade, an additional $1 trillion will need to be invested annually in clean energy in emerging and developing countries alone to put the world on track to reach net-zero emissions by 2050.
That’s seven times current levels, even excluding climate finance financing needs in other countries and sectors such as agriculture and manufacturing, and the requirements to build resilience and adapt to the impacts of climate change that we are already experiencing.
The cost of not taking action to prevent temperatures rising above 1.5°C would be even higher. Investments in climate protection are therefore not only necessary to avoid catastrophic climate change, water scarcity or the loss of biodiversity, to name just a few examples, but they also make long-term economic sense.
The private sector has an important role to play in addressing global environmental challenges. By taking action to reduce its environmental footprint and supporting sustainability initiatives, the private sector can contribute to a more sustainable and resilient future for all. However, cooperation between governments, the private sector and financial institutions is required.
Go forward
The European Commission responded to the US Inflation Reduction Act (IRA) by proposing a Net Zero Industry Act and a European Critical Raw Materials Act. These are intended to increase domestic production and diversify supply chains. The goals are similar to those of the IRA: promoting local businesses and security of supply. The laws aim to create better conditions for cleantech manufacturing capacity, which is expected to reach 40% of deployment needs by 2030.
By emphasizing global competitiveness and energy independence, they also aim to bring green jobs, education, talent and the manufacturing needed for the energy transition back to Europe. They are also intended to speed up the approval process, the most cited obstacle in Europe. Not to be left behind, the UK government has unveiled its own plan to increase clean and affordable energy production and create green industries, dubbed ‘Powering up Britain’, to underline the national approach.
Investment opportunities with a positive impact on the environment
Investing in companies and projects that contribute to the fight against global warming and other environmental problems can be a profitable and effective investment strategy. However, remember that they carry higher risks than traditional investments, so it is important to do full research and seek professional advice before investing.
Some areas with attractive prospects can be found in renewable energy and energy efficiency; For example, Vestas, Prysmian and Nibe are leading companies in these areas. In addition, solutions geared towards green infrastructure, such as public transport, bike rental and green buildings, can help reduce carbon emissions.
In addition, areas such as sustainable agriculture, including companies developing sustainable agricultural practices or offering products that reduce environmental impact, offer attractive prospects. Innovative waste management and recycling solutions can help reduce the amount of waste going to landfill and promote circular economy practices. Ecolab and Smurfit Kappa are some examples of companies in this space.
The race to move to net-zero emissions is accelerating around the world, with major government initiatives trying to get their fair share. The European Commission has taken a bold step towards net-zero emissions with two recently announced measures aimed at increasing industrial capacity for clean technologies and ensuring a sustainable raw materials value chain. The proposal contains ambitious targets and measures that are likely to outperform the US and China, a challenge that is difficult enough.