Propelling the clean economy pursuit

AXA IM's Amanda O'Toole looks at how advancements in clean economy will provide innovative solutions to push forward the energy transition

Last year, an extraordinary shift took place among corporates, consumers and governments in their collective attitude to green energy. This brought us to a unique point in society where all parties are prioritizing the pursuit of sustainable technology, specifically addressing CO2 emissions, limited global resources and our growing population.

With an increase in regulatory support, countries with net-zero targets now combine for approximately 61% of global emissions, 68% of global GDP and 56% of the global population. Clearly there is more work to be done, but developments stemming from this year’s COP26 meeting should help drive further progress.

Government and corporates setting ambitious goals

Policy momentum also continues to drive a green recovery across all major regions. In Europe, there is a strong pledge towards the clean economy, with the €750bn EU Green Deal setting the ambitious objective of reaching net zero green house gas (GHG) emissions by 2050. China’s 14th five-year plan also outlines a  commitment towards achieving net-zero emissions by 2060. However, to reach carbon neutrality, China needs to continue rapidly developing clean technologies and shift away from fossil fuels.

In the US, President Biden acted on his promise to implement clean energy infrastructure as part of a broader effort to prevent further catastrophes caused by climate change. The $1.2trn plan describes the proposed investment in electric vehicles (EVs) as the largest in history and will include $15bn to be spent across EV infrastructure – such as building 500,000 EV chargers – and electric buses.

In addition, many conventional corporations such as Amazon, Microsoft and Coca-Cola have committed to ambitious targets to reach net-zero carbon emissions, which has contributed to increased capex towards clean technologies, including energy storage and energy efficiency services. These pledges come in response to increasingly strict regulation regarding environmental standards and rising consumer demand for more environmentally-conscious products and services.

What this all means for investors

More investments in clean technologies will be essential to making a significant positive impact on the environment. It is estimated that governments and companies will need to invest at least $92trn by 2050 to reduce emissions quickly enough to avoid the worst effects of climate change. However, there is enough momentum to see this happen.

Consumers are also swiftly changing their consumption behaviors and are playing a more active part in minimizing GHG emissions – from the provenance of ingredients and raw materials to the environmental impact of finished products and packaging. Consumers are also more keen to purchasing EVs, utilizing cleaner energy to power their homes, and investing in companies that accelerate the clean economy.

The combination of all the above factors is propelling increased innovation for businesses operating within the clean economy. These advancements of the clean economy will provide innovative solutions to advance the energy transition and protect the limited amount of natural resources available for our growing population. Moreover, this also creates compelling investment opportunities.


Natalie Kenway

Natalie is editor in chief at MA Financial covering ESG Clarity, Portfolio Adviser and International Adviser. She was previously global head of ESG insight for ESG Clarity and has been an investment journalist...