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The biggest opportunity will come in the form of renewable energy
The United States has seen devastating wildfires ravage the Pacific Northwest (and Colorado more recently) as well as a record-breaking hurricane season in the Gulf of Mexico since we published our special report ESG Investing is Here to Stay on July 21. Climate change is responsible for the growing frequency of natural disasters, not to mention their increased power in terms of the damage and destruction they leave in their wake.
The International Monetary Fund’s latest World Economic Outlook states that the losses from unmitigated climate change on global GDP will average 15 per cent by 2100 (with a range of three per cent to 30 per cent). Likewise, the Network for Greening the Financial System (established by eight central banks following the signing of the Paris Agreement) indicates a reduction of 1.5 per cent to 23 per cent in global GDP per capita.
Yet, at a time of record-high government debt levels, the ability of fiscal policy to adequately respond to climate change impacts will be constrained. All of this is to say that private capital will play an enormous role in the world’s attempt to solve the problem. The good news is that scientists still say there is time to avoid the worst-case projections, meaning that investors can stand to benefit from the global shift to a low-carbon economy.