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CONTRIBUTORS

Seth Cothrun

Director, Thought Leadership
Franklin Templeton

This is a chapter from the Franklin Templeton Institute paper, Energy transition: Accelerating investment opportunities. To read all chapters in this paper, download the complete PDF or click here.

Chapter preview

In this piece, we focus on the opportunities of energy transition—moving from fossil fuel to renewables. Transition is not just limited to countries and companies focused on sustainability. Energy transition impacts sectors, companies and geographies dependent on fossil fuel, and their attempts to diversify business models and economies.

Also in this chapter, we discuss the “how” and “why” of transition as well as detail the investment opportunities and requirements to finance transition. This includes digging deeper into:

  • The estimated US$275 trillion of investments required over the next 30 years—or roughly 6%–9% of annual gross domestic product (GDP) in most years—required to reach net-zero by 2050.1
  • The challenges of ramping up investment immediately. 2022 marked the first time transition investment matched fossil fuel investment.2 Investments must triple in 2023 to over US$4.5 trillion, and continue to grow to meet targets.3 And, even more when accounting for the subsidy gap.
  • The risks of delaying or not transitioning. Under current policies, this could result in chronic global GDP losses of nearly -20% based on models from the Network of Central Banks and Supervisors for Greening the Financial System (NGFS), a consortium of 125 central banks and 19 financial observers.4

This is a chapter from the Franklin Templeton Institute publication, Energy transition: Accelerating investment opportunities. Arguably, humanity’s greatest current challenge is the need to shift to low and net-zero carbon in a little less than 30 years. New technologies are accelerating the renewable energy transition while reducing environmental impacts. The renewable energy sources of today and the future require new and smarter technologies as well as the rapid creation of new infrastructure. These challenges create investment opportunities as investors have a critical role given the capital required to fund this transition. To read the full paper and explore views from across our specialist investment managers, download the complete PDF or click here.

Endnotes

  1. Sources: Krishnan, M. et. al. 2022. The net-zero transition: What it would cost, what it could bring. McKinsey Global Institute in collaboration with McKinsey Sustainability and McKinsey’s Global Energy & Materials and Advanced Industries Practices. January 2022.
  2. Source: International Energy Agency. 2022. World Energy Investment 2022. June 2022.
  3. Source: Network for Greening the Financial System Net Zero 2050 scenario using REMIND-MAgPIE (phase 2).
  4. Source: IIASA NGFS Climate Scenarios Database, NiGEM model (REMIND inputs).

 

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