Decarbonisation tracker: progress to net zero through the lens of investment

As of this year, the world still needs to invest cumulatively more than USD 270 trillion in decarbonisation actions if net-zero 2050 ambitions are to be met. With our industry-first "decarbonisation tracker", we monitor progress on decarbonisation through the lens of investment. The novelty of our approach is that we collate existing estimated investment needs and match this with actual investments in decarbonisation made to date. This provides a window into the progress still needed to get to net zero, as well as the magnitude of the uncertainty.

Our gap estimate of USD 271 trillion excludes investments in the fossil fuels sector that will still be forthcoming over the next years. It translates into an average annual investment gap of USD 9.4 trillion between 2022 and 2050, assuming investments are spread equally across the years.

Although a big number, this likely represents the lower bound of the associated uncertainty range. Not least because it covers the energy, transport, buildings and industrial sectors only, meaning our study accounts for at most 70% of global greenhouse gas emissions. Of those four, the biggest gap in investment is in the transport sector.

The task to close the large investment gap by 2050 is do-able, in our view. For example, maintaining the current spending would fill one third of the gap. A further 10% could be filled by re-allocating a feasible share of spending from high- to low-emission assets. Much of the incremental investment required – almost USD 5 trillion on average annually – can be provided by aligning private sector investments with climate ambitions, such as, among others, by expanding the green bond market.

The green bond market still accounts for less than 2% of the value of the global bond market: it is far too small. Stronger action is needed on reducing barriers to investment and international convergence on the taxonomy for climate and green investments.
Jerome-Jean Haegeli, Swiss Re Group Chief Economist

It makes sense to do so. Each dollar invested today means lower GDP losses in the future. Indeed, as a follow on from our The Economics of Climate Change report in 2021, we find that the GDP losses mitigated by closing the investment gap by 2050 essentially equate to the incremental investment need. In other words, closing the gap will pay for itself.

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