$100 trillion to fix climate change? With a “T”? That should grab your attention…
– The capital necessary for a climate transition is mind-boggling.
– $100 trillion is a lot of money.
This headline turned my head, “Brookfield Renewable Sees a More Than $100 Trillion Opportunity Ahead.” Here’s an excerpt from the article:
Brookfield CEO Connor Teskey led off the call by discussing what the company sees ahead. “We look forward to a multidecade opportunity to advance decarbonization and assist with the transition of electricity grids to a more sustainable future,” he said. “Advancing the transition to a lower-carbon future will require substantial capital, in excess of $100 trillion over the next three decades.”
To answer the question why this much money is necessary – how urgent is the problem – see this intro from this Bloomberg Green article by Eric Roston:
In early January the high atmosphere above the Arctic warmed abruptly, which happens about six times a decade. That warming gradually weakened the jet stream below, causing frigid air to spill down across North America. Texas froze, and tragedy ensued. Some evidence points to a link between the quickly heating Arctic and cold spells to the south, but not everyone agrees, and it’s become a bit of
Scientists are much clearer about humanity’s role in more common extreme weather events. Some 40,000 people evacuated their homes in New South Wales in March after biblical rainfall. Aspects of Australia’s climate make parsing the climate influence of any precipitation event more complicated, but new work affirms that more greenhouse gas means more heat, a wetter atmosphere, and more extreme rainfall. It’s not only about more or less precipitation—the timing of the seasons is changing almost everywhere, with California’s rainy season now starting a month later than it did 60 years ago.
Global heating has also slowed down the Gulf Stream, the vast Atlantic circulation system that directly affects climate in Africa, the Americas, and Europe, to its lowest level in 1,000 years. This deceleration is a long-predicted and long-feared development, and scientists say a better understanding of it “is urgently needed.”
And there here is an excerpt from this Bloomberg Green column by Nathaniel Bullard:
A hundred-trillion dollars is a lot of money. Spread it out over three decades, though, and it’s merely $2 trillion to $3 trillion a year. It’s also not all the same type of money, so to speak. Those trillions will need to flow to early-stage companies with a hefty appetite for risk but little capital, and from giant asset managers with a low-risk appetite but trillions under management. Pumping up these flows will be a big job for the world’s capital markets. It will also depend on financial plumbing functioning perfectly.
Part of that perfect function is asset rotation, a technical term for companies funding assets at certain stages of their lives, then selling them on to other, better-positioned owners at another stage of life. A project developer uses more expensive capital to fund early work on a wind or solar or battery project; it then sells the asset at a later stage in development, providing the original owner with new investment capital and the new owners with a performing asset. As my colleague Bo Qin says, “asset rotation shows that markets work.” It’s how millions become billions become trillions.
Private equity— capital that, in the energy infrastructure world, is generally geared towards the earlier stages of asset life—has a record amount of dry powder right now, according to Preqin Ltd., a private equity information service. That means more than $2 trillion of funds raised but not yet invested, about eight times more than at the start of the millennium.