If the planet heats up by 5 degrees Celsius (9 degrees Fahrenheit), well above the 2-degree threshold set by the Paris Accord, investors may face $7 trillion in global losses. But that could be mitigated by investments aimed at reducing and removing carbon from the atmosphere, emerging economies including China and India are the best bets for investors hoping to fight climate change and boost returns, as per Morgan Stanley’s Institute for Sustainable Investing and The Economist Intelligence Unit.
Emerging economies from China to Cuba to Nigeria present some of the biggest opportunities for investors as they become centers of clean energy innovation.
Nigeria, for example, has a rapidly developing solar industry, and expects energy consumption to grow almost 14 percent by 2020. And Cuba, where the energy market is expected to see double-digit growth over the next five years, recently opened a renewable energy research and development center. India offers opportunities for clean transport because vehicle demand is expected to double by 2020, according to the report. Bloomberg New Energy Finance expects more than $4 trillion to be invested in renewable electricity generating capacity in Asia by 2040.
Regulatory changes will also play a role in determining the industries investors can tap into to fight climate change. Countries like China and India can see renewable energy as a path to reduce poverty, create jobs and improve energy security and social stability.
For instance China’s announcement of a ban on gas and diesel powered cars is likely to change the game for the energy sector and automobile sector which in turn creates a significant new market opportunity through a policy decision specifically related to climate change mitigation.