The talks around climate change and energy transition bring both optimism and concern in 2025. On the positive side, the push for a net-zero carbon future creates significant opportunities for investment.
On the flip side, the physical impacts of rising global temperatures and climate change pose increasing financial risks. S&P Global focuses on measuring these risks and opportunities, suggesting a $53 trillion energy investment requirement.
Meanwhile, other analysis like that from McKinsey also explores the investment opportunities needed to transition to a green economy, indicating a $9.2 trillion annual funding for it. Let’s unlock what’s behind these numbers and why addressing them is essential to achieving net zero.
Net Zero Investments: A $53 Trillion Opportunity Awaits
Investing in low-carbon energy aims to reduce greenhouse gas (GHG) emissions and curb the long-term effects of climate change. According to S&P Global Commodity Insights, achieving net-zero emissions by 2050 could open up $53 trillion in global energy investment opportunities. This includes investments in clean energy technologies, power generation, and transmission infrastructure.
In contrast, if companies stick to a business-as-usual scenario with moderate emission cuts (SSP2-4.5 trajectory), investments in these areas will total about $37 trillion by 2050.
- SSP2-4.5 (Medium Emissions): A moderate approach where emissions stabilize and warming reaches 2.7°C by 2100.
The $53 trillion estimate is likely conservative, as it excludes spending on electric vehicles, charging networks, energy-efficient buildings, and other non-energy sectors.
The fossil fuel industry, however, faces a sharp decline in investment opportunities. Spending on oil, gas, coal, and thermal power will drop from $800 billion in 2024 to less than $600 billion by 2050 under the base case. In a net-zero scenario, this figure falls even further, to below $200 billion.
- Net-Zero Scenario: A backcast model where fossil fuel use nearly disappears, and clean energy dominates. This scenario limits warming to 1.5°C by 2100.
Most of the investment in clean energy will occur in non-OECD Asia-Pacific regions (excluding Australia, Japan, New Zealand, and South Korea). These areas will require $25 trillion by 2050 under a net-zero scenario, compared to $17 trillion under the base case. North America and Europe could also be key regions for clean energy investment.
- Base Case: A probable future where global emissions drop by 25% by 2050, but fossil fuels remain significant. This scenario aligns with the SSP2-4.5 pathway and projects 2.4°C warming by 2100.
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Investing Big: Why Net Zero Needs $9.2 Trillion Annually
In a separate analysis by McKinsey, achieving net-zero emissions by 2050 requires $9.2 trillion annually on physical assets (capital expenditures or capex)—$3.5 trillion more than current spending. This increase equals half of global corporate profits and a quarter of 2020’s total tax revenue.
- The $3.5 trillion annual spending for energy and land-use systems represents a 60% rise from current levels. By 2050, that amount will total around $275 trillion.
The figure includes a shift from fossil fuels to renewable energy sources and a move towards zero-emission vehicles.
With expected economic growth and current transition policies, the additional spending may drop to $1 trillion annually. However, the next decade is crucial, with spending front-loaded and impacts varying across regions and industries.
The low-carbon transition requires immediate and substantial upfront investments, with capital spending peaking around 2026-2030 at about 9% of global GDP before declining, per McKinsey analysis. Early action is crucial to mitigate long-term risks and costs associated with delayed efforts.
The Financial Toll of Climate Risks
While clean energy investments offer financial opportunities, the physical impacts of climate change also come with significant costs. S&P Global Sustainable1 estimates that the world’s largest companies (in the S&P Global 1200 index) could face $25 trillion in cumulative costs by 2050. This figure includes:
- $4.5 trillion in lost revenue from business interruptions.
- $3.8 trillion in higher operating costs.
- $16.5 trillion in property damages and extra capital expenses.
These costs are tied to climate hazards like extreme heat, water stress, droughts, and flooding. Extreme heat alone accounts for 58% of the projected costs, while water stress and drought contribute 21% and 11%, respectively.
Sector-Specific Impacts
Utilities, energy, financial services, and communication companies will bear the largest financial burdens due to climate risks. These sectors are particularly vulnerable to extreme heat, water shortages, and droughts.
It’s worth noting that these costs are based on companies in the S&P Global 1200 index, which includes about 1,200 large firms from regions like North America, Europe, Asia, and Latin America. Together, these companies own nearly 3.5 million physical assets.
- The estimated $25 trillion in costs by 2050 represents 74% of total revenue and 31% of the total market value of these companies in 2024.
The Long-Term Benefits of Achieving Net-Zero Goals
Investing in low-carbon technologies and renewable energy can significantly reduce the physical impacts of climate change. For example, while achieving net-zero emissions by 2050 won’t drastically lower climate costs for S&P Global 1200 companies by mid-century, it could save them $15 trillion in cumulative costs by 2099 compared to a business-as-usual scenario.
Expanding these savings to the global economy shows an even greater benefit. Reducing emissions and transitioning to renewable energy can help avoid the worst climate impacts and minimize future costs.
Furthermore, the World Economic Forum noted that the investment goals, though represent a significant increase, are not impossible to achieve. According to WEF, McKinsey’s estimate of $9.2 trillion in annual capex highlights the challenge.
According to the IEA, the global economy invests $1.4 trillion annually in clean energy and related infrastructure. With existing policies, this figure could rise by $2.5 trillion, leaving an annual investment gap of $5.3 trillion.
Redirecting $3.7 trillion from brown infrastructure—such as high-emission oil, gas, cement, and steel industries—to green energy projects could substantially close this gap. The remaining $1.6 trillion needed would represent just 2% of global GDP annually.
While ambitious, this transition is achievable with strategic shifts in financial priorities, paving the way for a sustainable and low-carbon global economy. By acting swiftly, the world can reduce future climate risks and unlock the vast potential of a net-zero energy future.
