This report highlights the significance of the United Nations COP21 meeting held in Paris in December 2015 aimed at achieving a global legally binding agreement, designed to keep the temperature increases below 2°C, avoiding the worst effects of climate change. It examines the impact of climate change and races to a low carbon future to avoid the worst consequences of global warming. It suggests that climate change presents both a threat and an opportunity, with enormous potential benefits from investing in low-carbon technologies and that the cost of mitigating future carbon emissions must be compared with the cost of remaining in the existing economic regime.

The report reveals that climate change is one of the central risks faced by the global economy and that one of the salient impacts of climate change is along the lines of a massive and potentially very costly economic shock. It raises the alarm that market failure is causing a dangerously large climate change and energy investment gap. The report contains suggestions for both policymakers and corporates, outlining the crucial role the financial sector must play in mobilising capital towards building a low-carbon economy.

The report indicates that the cost of transitioning to a low-carbon economy will vary by region and further presents current estimates of global spend on energy. It also says that the cost of following a low carbon route will have a minimal difference from business-as-usual scenarios. It calls for a global energy transformation investment policy that would reallocate capital away from carbon-intensive investments towards more sustainable energy projects. It recommends that businesses turn towards achieving ESG targets and sustainable investing to mitigate ESG risks, such as the risk of stranded assets.

This report outlines options for funding to achieve the low-carbon future goal and explains the instruments it has found useful in renewable project lending for institutional investors. It outlines some barriers to the green bond market, which include lack of standardisation in frameworks. The report emphasises that policymakers, regulators, and banks must work together to develop solutions for climate change funding and notes that global asset allocation to the green bond market remains limited. Lastly, it encourages markets to develop practical and sustainable solutions to tackle climate change.

The report explores the potential total energy spend under differing energy mixes, for low carbon and for business-as-usual (BAU). It indicates that on an undiscounted basis, the cost of following a low-carbon route is cheaper than inaction, which is much more expensive in terms of potential liabilities. The report calculates the estimated global spend on energy by the middle of the twenty-first century and proposes that policy frameworks need to align global energy allocation, green subsidies, and prices to foster a sustainable future.

This section discusses the impact of CO2 emissions on the environment and climate change. The report calls for a focus on renewables and energy efficiency and points out that the electric power industry needs to be a focal point of such efforts because it is the most potent source of carbon emissions. It presents evidence that introduces some advantages of renewable energy projects over traditional power generation methods and recommends action on investment in renewable and energy-efficient projects as well as action regarding carbon pricing and lowering the carbon intensity of traditional energy production.