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A shift in spending from high- to low-emissions assets could create the largest reallocation of capital in history—a potential boon for the environment and the economy alike.
Big spender
After years of companies playing defense with sustainability, the landscape has shifted to an emerging growth opportunity—for those savvy enough to seize it.
The Great Reallocation
In this edition:
A quick briefing in five—
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Mixed bag
The opportunities will be uneven. Developing economies and regions rich in fossil fuels will be most financially exposed to the net-zero transition.
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The net-zero transition: What it would cost, what it could bring
Gold rush
Fast-moving companies stand to benefit. Eleven value pools could generate more than $12 trillion in annual revenues by 2030.
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Pitfalls
And risks abound. For example, companies trying to keep their sustainability promises by using green materials could be stymied by a shortfall in supply.
The net-zero transition: What it would cost, what it could bring
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Playing offense to create value in the net-zero transition
Article
Report – McKinsey Global Institute
The net-zero transition: What it would cost, what it could bring
Report – McKinsey Global Institute
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It’s not easy buying green: How to win at sustainable sourcing
Article
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Green tech
Climate technologies can help. Scaling them will be a challenge, however, and may require businesses to work together, taking a more cooperative approach than they are used to.
Playing offense to create value in the net-zero transition
Article
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Delivering the climate technologies needed for net zero
Article
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It’s not easy buying green: How to win at sustainable sourcing
Article
Delivering the climate technologies needed for net zero
Article
+1
+2
–1
0
–2
Employees
Employers
–2
–1
0
+1
+2
Somewhat to most important
Somewhat
to most
important
Poor health
Poached by another
company
Development
opportunities
Ability to work remotely
Looking for
a better job
Inadequate
compensation
Valued by manager
Sense of
belonging
Valued by organization
Potential for
advancement
Flexible work schedule
Having caring
and trusting
teammates
More important to employees than employers
More important to employers than employees
Pay to play
Play to win
Stack the deck
Stack the deck
Seek talent among nontraditional employees and those not in the workforce at all.
Stack the deck
Play to win
Listen to your workers—anticipate and address concerns, foster psychological safety, and create a supportive culture.
Play to win
Pay to play
Restructure compensation packages and consider benefits that help create better work–life balance.
Pay to play
Average annual spending on energy, mobility, industry, buildings, agriculture, forestry, and other land use, 2021–50, $ trillion
$9.2
New
spending
low-emissions assets
$3.5
reallocated to low-emissions assets
$1.0
low-emissions assets
$2.0
high-emissions assets
$2.7
Current
spending
Transport
Buildings
Power
Water
Consumer
Agriculture and land use
Oil, gas, and fuels
Hydrogen
Waste
Industrials
Carbon management
1,300 to 1,800
1,000 to 1,500
1,100 to 1,200
550 to 1,200
850 to 1,200
650 to 850
300 to 400
100 to 200
250 to 300
650 to 1,150
2,300 to 2,700
Addressable market size in 2030, selected categories,
$ billion
18.0%
9.8%
5.9%
Other
economies
Developing countries
Fossil fuel– producing regions
Charles Emond, CEO, Caisse de dépôt et placement du Québec (CDPQ)
—
This train is not reversing, and it’s going to accelerate. We talk about that with leaps forward in technology. It’s also happening with climate and ESG [environmental, social, and governance]. These issues are here to stay and may actually represent the biggest investment opportunity.”
“
Carbon-neutral capital
But smart companies recognize the opportunity in sustainability investments, particularly as more stakeholders demand net-zero commitments.
CEO Interview: CDPQ invests in climate action
Interview
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CEO Interview: CDPQ invests in climate action
Interview
Adria Horn, lieutenant colonel, US Army Reserve; executive vice president of workforce, Tilson Technology Management
—
People need to feel valued and supported, even when they’re not entirely sure why they’re feeling so fragile.”
“
Demand
Supply
Demand
Supply
Demand
Supply
Demand
Supply
23
22
27
11
50
33
41
41
9
2
50
43
597
256
85
72
682
328
274
260
59
333
280
20
Base scenario
Ambitious
Projected demand and supply of green materials in 2030, by market
European flat green steel,
million metric tons
Global green/secondary aluminum,
million metric tons
European low-carbon battery,
gigawatt-hours
Global automotive-grade recycled polypropylene, thousand metric tons
Ten climate technology families, with examples
Agriculture and food
Precision agriculture, alternative proteins
Electrification of heat sources, green steelmaking
Industrial-process innovation
Point-source carbon capture, direct air capture
Building technologies
Geothermal heating, heat pumps, electric equipment
Carbon removal, capture,
and storage
Nature-based solutions
Battery recycling, heat recovery, plastics recycling
Monitoring and verification
for forests, mangroves
Circular economy
Advanced biofuels,
e-fuels
Sustainable fuels
Electric-vehicle batteries, long-duration energy storage
Batteries and energy storage
Hydrogen
Electrolyzers, fuel cells,
methane pyrolysis
Solar, wind, grid innovation
Renewables
Average annual share of GDP spent on physical assets for energy and land-use systems, by region, 2020–50, % of regional GDP