Green equity exposure in a 1.5°C scenario
Green investment needs to scale rapidly to limit the rise of global temperatures to 1.5°C, with recent studies estimating that between USD109-275 trillion is required by 2050.
Green investment needs to scale rapidly to limit the rise of global temperatures to 1.5°C, with recent studies estimating that between USD109-275 trillion is required by 2050. Drawing on the FTSE Russell Green Revenues data, this research explores the impact of these macroeconomic estimates on the listed equity markets and forecasts benchmarks’ green revenues exposure in the 1.5°C scenario.
Produced in collaboration with The Institutional Investors Group on Climate Change (IIGCC), the aim of this paper is to inform climate investment decision-making, building the green economy exposure of their equity portfolios and climate benchmarks in line with a 1.5°C temperature scenario.
The research provides:
- A review of recent macroeconomic studies that suggest the 1.5°C scenario requires between USD 109-275 trillion cumulative investment in the economy by 2050. However, few have attempted to translate these estimates into impacts on global equity markets
- A proposal of two approaches to transform these macroeconomic estimates into green economy exposure of the listed equity
- Analysis which shows that under the 1.5°C scenario, the green economy exposure in global benchmarks would jump significantly between 2020-2030, increasing more than threefold (by 1.4 percentage points p.a.) by 2030, and more gradually between 2030 - 2050 (0.3 percentage points p.a.). This is consistent with the need in a 1.5°C scenario to not only reach net zero emissions by 2050, but also to deliver emissions savings early on to limit total cumulative emissions before 2050
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