Ahead of the COP26 summit, Bank of America Global Research has released a comprehensive report on net-zero investments, forecasting an annual requirement of $5 trillion over the next 30 years to achieve global emissions targets.
According to their analysis, the overall cost of this transition is estimated at $150 trillion—three times the value of the COVID-19 stimulus package enacted in this decade. Furthermore, initiatives aimed at decarbonization could contribute to an increase in global inflation by up to 3% per year, driven by a $500 billion annual rise in central bank balance sheets.
The report asserts, “While it will undoubtedly be costly, we believe this transition is feasible through the convergence of technology, economic imperatives, market dynamics, and Environmental, Social, and Governance (ESG) principles.” However, the implications of inaction may be even more severe, with projections indicating a potential loss of over 3% of global GDP annually by 2030. This figure could escalate to a staggering $69 trillion by the year 2100. Additionally, climate policy adjustments could lead to a significant decrease in global equity market value, estimated at approximately $2.3 trillion, which would impact corporate earnings for specific sectors severely.
Despite the challenges, several sectors stand to benefit from this transition. Investments in renewable energy, hydrogen, electric vehicles, sustainable batteries, and biofuels are expected to surge.
With a cumulative market capitalization exceeding $1 trillion and substantial exposure to climate solutions, the following stock recommendations by Bank of America should be considered ahead of COP26:
Renewables (Global)
- NextEra Energy: A leader in U.S. renewable utilities
- Enphase Energy: Specializes in solar modules and inverters
- Vestas: A top manufacturer of wind turbines
- E.ON: Focused on electricity network distribution
- EDPR: Engages in renewables and onshore wind projects
- Acciona: Key player in EU renewable initiatives
- Xinyi Solar: A prominent producer of solar glass in China
Industrials (Energy Efficiency, Electrification)
- Kingspan: Expert in building insulation and energy efficiency
- Sika: Innovator in green building and infrastructure
- Norsk Hydro: Produces lower carbon, recycled aluminum
- Generac: Known for backup power generators and solar energy storage
- WEG: Facilitates decarbonization and renewable energy sources in Latin America
- Waste Connections: Provides recycling services and methane capture
Hydrogen (Industrial Gases, Electrolysers)
- Air Liquide: A leader in industrial gases and hydrogen solutions
- Nippon Sanso: Japanese industrial gas provider with CCS expertise
- Siemens Energy: Engaged in renewables, transmission, and hydrogen electrolysers
Biofuels (Ethanol, Biogas, Biodiesel)
- Raizen: Joint venture between Cosan and Shell focused on bioenergy
- Neste: A European pioneer in renewable biodiesel
Electric Vehicles (EVs, Batteries)
- CATL: Leading global producer of lithium batteries
- Samsung SDI: Specializes in lithium-ion batteries in Korea
- SK Innovation: A leading manufacturer of EV batteries in Korea
- NIO: Renowned Chinese EV manufacturer
- XPeng: Innovative smart EV maker from China
- BYD: A prominent brand in EVs and batteries in China
- Lucid: Known as the luxury alternative to Tesla in the EV market
Energy Transition (Carbon Capture and Storage)
- Aker Carbon Capture: A specialized company focused on CCS solutions
This investment landscape highlights both the challenges and opportunities that lie ahead in the drive towards a sustainable future.