Net-Zero is a term that has become popular in both the public and private sector circle thanks to the massive advocacy performed by the environmental movement led by the United Nations. More recently, following the COP15 and COP26 Climate Summits that respectively took place in Paris, France in 2015 and in Glasgow, UK in 2021, the term has become synonymous with the ongoing green industrial transformation. Net-zero refers to the level in which the greenhouse gasses going into the atmosphere are harmonized by their complete removal. When we reach Net-Zero, which for now is tentatively targeted by 2050 (according to the COP26 pledges by over 100 countries), global warming should stop. This should result in less intense and frequent disaster events. In order for these carbon removals to be effective, they must be permanent, and be linked to long term sustainability and green-growth policies that prevent new unavoidable carbon emissions.
The business opportunity
According to McKinsey, growing demand for net-zero services and technologies are accelerating and could generate more than $12 trillion of annual sales by 2030 with key leading sectors including transport ($2.3 trillion to $2.7 trillion per year), power ($1.0 trillion to $1.5 trillion), and hydrogen ($650 billion to $850 billion). Such a transformation of the global economy will create significant growth potential for climate technologies and solutions as already evidenced by the massive growth of green startups and green unicorns (companies valued over 1 billion dollars). To reach Net-Zero target we will need to invest at least US$ 10 trillion dollar per year between now and 2050. While this price tag is high, the cost of unmanaged and unpredictable climate change (based on business as usual) would be much higher as climate events are projected to affect about 20% of global GDP by 2040.
The market status and the opportunities ahead
While many decarbonizing technologies in the energy, mobility and manufacturing sectors require more investment to make the underpinning technologies scalable, there are positive market signals indicating that large corporations believe that green hydrogen, green steel, green aluminum, and green cement (just to name a few) will become economically viable very soon. Davos First Mover Coalition (FMC) is a great example where over 55 leading corporations have started buying these technologies to scale up green tech “early adoption”. All green focused or interested companies should also learn from digital-business leaders, and emulate their aggressive growth plans, embracing risk taking, and tapping into new market trends. Embracing the speed of these companies of the 1990s could create a market advantage and generate massive upside possibilities for those early movers. Finally, learning from the Davos private sector movement, this is a great time to secure investment as the perception of climate risk and market transformation is prioritized by all market participants.