Financial resources and sound investments are needed to address climate change for both reasons, reduce emissions, promote adaptation to the impacts that are already occurring, and build resilience. The benefits of investment greatly outweigh the cost, and yet the capacity to deliver and access these services is uneven and inadequate.
Studies and reports that were conducted before the COVID 19 pandemic have revealed that to survive and maintain a sustainable world for the next generations to come, people need to make significant investments in infrastructure. Moreover, transitioning to a new economy can unlock new economic jobs and opportunities, thus giving back to the economy.
Why invest in climate solutions
These investment decisions are crucial since they can determine whether we create new wealth or destroy the potential path to new wealth and prosperity. If we are to succeed in limiting climate change to sustainable and livable levels, then all assets are in question. This calls for a decrease in burning fossil fuels and coal mines being shut down and being replaced with solar and wind.
The price of coal has already become increasingly expensive compared to renewable energy sources; for instance, replacing 500 gigawatts of coal with solar energy could yield almost $950billion. The UN Secretary-General has recently set up six priorities for climate action, which include:
- Abandoning fossil fuels
- Ending coal-fired plants
- Investing in solar energy resources
- Increasing international cooperation
- Ensuring a just transition that leaves nobody behind
- Taking climate risks and opportunities into account in all financial and policy decisions
How to invest in climate change
Averting dangerous climate change will require two simultaneous strategies: “Decarbonizing” energy and industry by reducing and eliminating the use of fossil fuels and implementing “natural climate solutions” (NCS) on a massive scale by protecting and restoring high-carbon ecosystems such as tropical forests. Here's how investors can contribute to climate change:
Reduce greenhouse gas emissions
Investors can help achieve a net-zero world in which carbon removal brings emissions from a range of sources to zero or balanced out. These emissions can be decarbonized in energy supply through the three Rs: reduction, removal and retrofitting.
Reductions in energy demand can also decrease emissions while reducing operating costs, making reductions economically desirable even absent climate considerations. Emissions reduction, which includes the decarbonization of the energy supply, has been a significant focus of climate investments. There are also less well-known opportunities to reduce energy demand and to transform other (non-energy) carbon-intensive processes.
Carbon removal is necessary to reach net-zero in situations where carbon-neutral substitutes are not available. Excess greenhouse gases can be removed from the atmosphere in two ways: naturally and mechanically. Greenhouse gases can even be removed from the ocean, which absorbs CO2.
Retrofitting helps to reinvest in food and agriculture in which agriculture will need to adapt to changing climate conditions and feed a greater number of people.