IPCC_AR5__Implications_for_Investors__Briefing__WEB_EN

ReducingGreenhouseGas EmissionsOpportunities and Risks for Investorsand Financial InstitutionsThe IPCC estimates that approximatelyUSD 340 billion was invested in mitigatingclimate change in 2011/12, with 62% of thisamount provided by the private sector 5 . It isimportant to qualify this statement by notingthat these numbers include all financial flowswhose expected effect was to reduce netemissions and/or to enhance resilience to theimpacts of climate variability. That is, thesenumbers cover the full value of the financialflow rather than the share associated withthe climate change benefit. For example, theycover the entire investment in a wind turbine(which may also contribute to improvedsecurity of electricity supply) rather than theproportion of the investment attributed toemission reductions.Policies aimed at decoupling economicgrowth from GHG emissions will haveprofound implications for capital allocationdecisions. A transformation to a lowcarboneconomy implies new patterns ofinvestment, requiring increased investmentin areas such as renewable energy andreduced investments in areas such fossilfuel extraction and conventional fossil fuelbasedpower generation. In order to keep theglobal average temperature rise since preindustrialtimes below 2°C, the additionalinvestment required in the energy supplysector is estimated to be between USD 190and 900 billion per year through to 2050 6 ,accompanied by a significant shift away fromfossil fuels towards low-carbon sources suchas renewables, nuclear and fossil fuel burningwith carbon capture and storage (CCS), andtowards energy efficiency. Constraints on theuse of fossil fuels would affect the price ofcommodities such as coal and oil, and haveconsequent implications for the mining, oiland gas companies in investors’ portfolios.IMPLICATIONS FOR INVESTORS AND FINANCIAL INSTITUTIONS P11