There’s a growing global consensus on the urgent need to combat climate change. But governments’ uncoordinated reactions to energy price spikes in the past year showed that a successful and orderly transition to a greener economy is far from guaranteed.
A ‘disorderly’ transition, driven by disjointed policy actions therefore weighs more heavily on our baseline scenario for this year’s Capital Market Assumptions: ‘A rocky net zero pathway’. Limiting the rise in temperatures over the net zero 2050 horizon is the shared endgame, but disruptive themes will profoundly affect the real economy and financial markets.
In the near term, the energy transition could provoke bouts of inflation due to higher carbon and commodity prices. But price pressures won’t be persistent. A more lasting impact may be seen from a shift away from fossil fuels, technological changes, and initially lower productivity. This will dent domestic demand and may mean economic growth is more subdued in the medium to long term.
You can now read the full whitepaper at the link below