The Net Zero Transition, Managing Investor Demands - A Financial Stakeholder's View: Blackrock

What does the net zero transition mean globally and how much will it cost?

Achieving net zero Greenhouse Gas (GHG) emissions by 2050 at the latest is essential to limiting global warming rise to 1.5°C above pre-industrial levels. To achieve this, global GHG emissions must be reduced by at least 43% by 2030 compared to 2019 levels, and at least 60% by 2035, reaching net zero by 2050. This is the decisive decade to make that happen. Failure to meet net zero will result in stranded assets, a dire future for the next generations and widening inequalities. By 2050, 2.2°C of warming has the potential to reduce global GDP levels by up to 20% as increased storms, wildfires, drought, flooding and crop failures hamper growth and threaten infrastructure2 . By comparison, the cost to tackle climate change is much cheaper at only 1.5% of global GDP, or approximately $1.5-2 trillion a year for the next 30 years.

For business sectors globally, meeting a 1.5°C limit means a GHG emission reduction of 30-gigatonne (GT) carbon dioxide equivalent (CO2 e) annually to 2030 across six sectors4 . 

The good news is that mitigation solutions exist for most sectors to close the gap. They have the potential to halve emissions from 2019 levels by 2030 and cost less than USD $100 per tonne of CO2 e.5 The bad news is the world is not on target to limit warming to 1.5°C. Going into COP28 in November 2023 in the United Arab Emirates (UAE), the UN Intergovernmental Panel on Climate Change (IPCC) highlights:

• GHG emissions are at the highest level in human history. Climate change is already affecting many weather and climate extremes in every region across the globe – with widespread loss and damage to both nature and people
• The planet has already warmed by 1.1°C since the pre-industrial era and current climate policies are projected to increase global warming by 3.2°C during the 21st century
• Loss and damage will disproportionately affect the poorest and most vulnerable populations, particularly those in Africa and least developed countries, creating more poverty
• Prioritizing equity, social justice, inclusion and just transition processes would enable ambitious climate mitigation actions and climate-resilient development
• Tracked climate finance for mitigation falls short of the levels needed to limit warming to below 2°C or to 1.5°C across all sectors and regions

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