Page 4 - AsiaElec Week 39 2021

AsiaElec COMMENTARY AsiaElec

SEB puts $4 trillion annual

price tag on net zero

SEB’S latest Green Bonds Report has placed a and was being driven by human activity, espe-
GLOBAL price of $4 trillion per year on the energy tran- cially greenhouse gas (GHG) emissions. The
sition if the world is to reach net zero by 2050. report noted that such developments as rising
It warned that while we have not quite LNG and gas prices, energy supply shortages
reached the panic stage yet, it was no longer pos- and extreme weather events were persuading
sible to ignore or dispute climate change, and it people and governments of the need for climate
was now time to start spending fast. investment.
The good news is that the Swedish Bank “Preventing more costly shocks in the future
concludes that this amount, equivalent to 5% of will require investment in adaptation measures
global GDP, is both cheap, when compared with and this is also likely to boost popular and polit-
doing nothing, and entirely feasible. ical support for faster investment in decarboni-
The report also said that traditional fears sation the cost of addressing the climate crisis,”
about taking on more debt to fund this transi- the report said.
tion have been swept away in 2021 because of
two major developments that have helped to per- Investment breakdown
suade governments and the international invest- The report breaks down the total investment
ment community that they will have to spend the requirement of $4 trillion per year into $2-25
money anyway. trillion per year to update energy infrastructure,
“Over the past year we have started to see including green generation, girds storage and
adverse effects like extreme heat, flooding and transportation.
forest fires on a scale that threatens both per- Another $0.5-1 trillion per year will be
sonal and economic safety for larger population needed to pay the costs of reducing the eco-
groups. The second [development is] that the nomic, physical and social costs of climate
pandemic taught them that rules can be broken change, such as floods, displacement of people
if the danger is serious,” the report said. and damage to buildings and food infrastruc-
Put simply, the climate emergency and the ture. This process is called climate adaption,
experience of the global coronavirus (COVID- which aims to reduce societies’ exposure and
19) pandemic have created an emergency sit- vulnerability to these physical risks.
uation and provided clearer proof that new A final $1-1.5 trillion per year will be needed
investment is required. to promote electrification and to decarbonise
“Reality is starting to bite as the cost of industry and production value chains.
extreme weather events is rising, both in terms
of property and human lives,” says Thomas Thy- ESG investment
gesen, head of research, climate & sustainable The report also warns that while the investment
finance, at SEB. industry has the potential to find the cash, it will
“At the same time, soaring natural gas prices require a wholesale reform to ESG practices and
highlight the danger of reducing one energy sup- stronger regulation of green investment in order
ply without adding another. In the latest issue of to prevent greenwashing.
The Green Bond – titled Floods, Fires and the Sustainable investors will want stronger links
IPCC: The Climate Crisis Gets Real – we ask between their cash the actual long-term impact
ourselves if this means that it is time to panic. of their investment. The report warns that “the
Our conclusion is that we certainly need to start link from sustainable financial investment to
spending, fast.” investment that reduces CO2 emissions is not
For 2021, the report forecasts that global sus- strong today.”
tainable debt issuance will now exceed $1.5 tril- This is because at present, “if the focus is on
lion, driven by corporates and the public sector, making sure you fund ESG-compliant com-
up from the SEB’s previous forecast of $1 trillion. panies or governments or you just want a low
The report forecasts that investment products average CO2 emission, then the link to actual
that directly link to sustainability, reducing emis- investment in the real world is going to be indi-
sions and funding renewable energy will have a rect at best.”
central role to play. This needs to change if sustainable invest-
ment is to expand to the levels needed, and
Physical risks investors are to have confidence in such things
The report stressed the IPCC has issued its stern- as green bonds are what they are, and do not
est warning yet that climate was a scientific fact threaten to damage an investors’ reputation

P4 www. NEWSBASE .com Week 39 29•September•2022