Net-zero goals around the world are focused on energy transition and reducing emissions, but a crucial component is investing in emerging markets. With nearly 50% of all global emissions coming from emerging markets, Candriam says net zero investing strategies must focus on these developing countries.
However, the challenge is the dearth of capital. The investment management firm says that emerging markets need to find an additional $94.8 trillion to transition to net zero by 2060. While this is an important sector to invest in, investors have stayed away due to the recent volatility in these markets and the ongoing geopolitical issues.
Candriam talks about how investors can support and make the most out of an energy transition in emerging markets.
“China boasted 300 GWT of installed solar capacity compared to 160 GWT for the European Union (EU),” says Candriam citing data published by Standard Chartered and CLSA. Candriam writes that the solar photovoltaic (PV) capacity of emerging markets will mark a crucial role in the energy transition phase towards solar energy.
Global solar PV and wind energy generation capacity is expected to quadruple by 2030. There is a huge possibility of emerging markets in Asia, due to the potential role of these markets in the global energy transition.
On the emissions front, Europe has a target for all vehicles to go carbon neutral by 2035. “With the battery accounting for a very sizable chunk in the price of an electric car, Asia is set to become the battery workshop of the world, helped by its collective dominance through the whole supply,” as per Galina Besedina, Senior Emerging Markets Equity Research Analyst and Portfolio Manager, Candriam.
Among other things, the investment management firm talks about the smaller players in the green supply chain. “Greenablers are producers of building blocks of a more circular, more energy-efficient global economy,” writes Paulo Salazar, Head of Emerging Markets Equity, Candriam.
Making its case for net zero investing, Candriam says that emerging markets will be a major ally in the global net zero ambition if incentivized through capital flows towards ‘climate action enablers’.
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