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How net-zero can boost economic growth

Alessandro Sanos, CAIA, SCR
Alessandro Sanos, CAIA, SCR
Global Director Sales Strategy & Execution, Commodities, Refinitiv

The move to net-zero requires widespread behavioural change and massive investment to transform the global industrial system. Addressing these challenges requires common purpose, starting with shifting the current ‘doom-and-gloom’ narrative to the substantial opportunities and rewards created by the decarbonisation of the economy.

  1. The drive to net-zero requires a shift from the pessimistic narrative to the tremendous opportunity that can be sparked by the transition to a low carbon future.
  2. Companies contributing to climate change mitigation and adaptation can create millions of new jobs and economic lift. Even companies in harder-to-abate sectors can reap rewards in attempting to decarbonise as financing inflows and lower capital costs can fund the transition and spark growth.
  3. Realising this potential requires everyone to play their part – not just policymakers, investors, and corporates, but also commodity producers, trading houses, and individuals. Doing so, we will future-proof the economy against climate risk on the way to hitting net-zero targets.

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In an increasingly uncertain world, climate change is an undeniable fact.

Since the industrial revolution 250 years ago, we have been pouring massive amounts of greenhouse gases into the atmosphere.

This unprecedented increase, both in terms of volume and in the rate of change, has caused the unequivocal rise of global temperatures and triggered climate change, and is causing increasingly devastating extreme weather events.

It is hard to overstate the magnitude of the change required to have a reasonable chance of decarbonising the global economy and reversing current trends.

In a tight timeframe, we must simultaneously and successfully juggle behavioural change, close the investment gap necessary to transform the global industrial system, manage the inevitable impact on prices, be mindful of shifting geopolitical balances, and ensure that the transition will not exacerbate inequality.

Commodities trading: insights to help you access the right information at the right time and in the correct format in the commodities trading complex

Net-zero growth is not an oxymoron

Undeniably, we face challenging times. But despite being narrow, the path to net-zero emissions is still achievable.

Over the past decades, in an attempt to capture society’s attention and keep climate change on top of governments’ agendas, climate science focused the narrative on doom-and-gloom scenarios.

This approach has failed to resonate with a considerable part of the public and their elected representatives.

To successfully shift behaviours, remove inefficiencies, and close the vast investment gap required to fund decarbonisation, we urgently need a paradigm shift that reframes the challenge to focus on the opportunities brought by the transition to a low-carbon economy.

Net-zero growth is not an oxymoron; the desired decrease in emissions does not inevitably translate into economic contraction.

On the path to a lower-carbon economy

The regulatory framework brought by the Paris Agreement and the guidance offered by transparency initiatives such as the TNFD, and the Taskforce for Nature Related Financial Disclosures, has introduced legal certainty.

This certainty allows ambitious plans to prioritise financing and investments that support the path to a net-zero global economy.

The transition to a lower-carbon economy presents indisputable opportunities for companies contributing to climate change mitigation and adaptation.

Capital flows are funding advancements in the technologies indispensable to making net-zero a reality and will create millions of new jobs and significantly lift global economic growth.

Sustainable investing is becoming mainstream, and the rapid growth of green bonds and green lending is an opportunity for companies to reduce capital costs and fund their transition.

There are also potentially high rewards for companies attempting to decarbonise even if they are in “harder-to-abate” sectors.

These sectors represent one-third of global carbon dioxide emissions and, while their emissions are more challenging, they are not impossible to abate.

It is technically possible to decarbonise all the heavy industries of cement, steel, petrochemicals and aluminium, as well as heavy-duty transport such as shipping and aviation with less than 0.5 percent of global GDP.

Finding opportunities and reaping the rewards

So, despite the immense challenge ahead of us, achieving net-zero will present indisputable opportunities if we avoid the trap of polarisation that has characterised the debate, and collectively, all play our role.

It is essential that policymakers fully integrate climate risk into financial stability monitoring and translate adaptation and mitigation policies into action. Investors play a crucial role in accelerating the transition with their strategic asset allocation decisions.

Commodity producers, commodity trading houses, and corporates must embrace ambitious sustainability and decarbonisation targets and future-proof their business models against climate risk. And, critically, individuals must adopt climate considerations in their consumption behaviour and keep everyone else accountable.

Net-zero growth is not an oxymoron. Instead, it is the fuel for the exciting economic revolution that lies ahead.

Commodities trading: insights to help you access the right information at the right time and in the correct format in the commodities trading complex


What are the benefits for companies turning towards net-zero?

Companies contributing to climate change mitigation and adaptation can create millions of new jobs and economic lift.