According to McKinsey, capital spending on physical assets will amount to $275 trillion during the transition period, or $9.2 trillion a year. The current annual capital spending lags the target amount by $3.5 trillion. This represents a massive investment opportunity for companies. The increase equals around half the global corporate profits recorded in 2020.
Estimates vary, however. While considering total investments (rather than just in physical assets), the IMF estimates a cumulative increase of $20 trillion, while Reuters’s economists suggest $44 trillion. The capital spending and fiscal support need to be front-loaded funded between now and 2030.
Estimates indicate a steep decline in the demand for fossil fuels during the transition, with a complete halt in coal, a 55% reduction in oil and a 70% in gas demands. Renewables and nuclear power will replace fossil fuels. Goods that contain carbon, such as plastics, will drive the demand for petroleum.
Jobs in the fossil fuel power sector are expected to be 60% lower but estimated to be replaced and surpassed by millions of jobs in renewable power. BofA forecasts 42 million green jobs under a $5 trillion per annum increase in investments. The increased investment offers considerable opportunities in new high-growth green sectors. The market sentiment for renewable energies is balanced, according to Acuity’s Sentiment Widget.