Today climate change is arguably the most critical long-term challenge that humanity is facing. “Climate action failure” is not only the top longterm threat in the World Economic Forum’s Global Risks Report for 2022, but is also a key element for investors to factor in when building long-term assumptions on the economy and markets.
In order to make the world less energy intensive and more climate efficient, policy makers will have to channel funds to the right investments. While on the one hand a targeted taxation policy could increase the cost of fossil fuels, a huge public and private investment effort is also necessary to support the transition. That is why central banks in particular will play a key role, for example through green quantitative easing and other non-conventional policies. This is a key element that needs to be factored in when forecasting long-term interest rates.
You can now read the full whitepaper at the link below