Logistics-wise, it’s fraught with looming problems demanding an unprecedented level of partnership between government and private enterprise.
But it also calls for deeply reflective cultural reform to embrace what experts believe to be cleaner, safer and cheaper renewable technologies.
Investors are playing a centre-stage role in forming a bridge between business and government, with asset management company Fidelity demanding a firmer commitment from the government to assist investors and industries in building a more robust pathway to net-zero.
Fidelity’s director of sustainable investing Daniela Jaramillo and Australian equities research analyst Justin Teo joined an InvestorDaily podcast to talk about these ambitious mid-century goals.
Mr Teo outlined the challenges in reaching net-zero, including power grids that are at risk of blackouts if coal-fired power stations aren’t properly transitioned to solar and wind power.
“That redistribution is something that will take time and it will take some technology, but also coordination across lots of different stakeholders from regulators, governments, and the companies that we invest in,” Mr Teo stressed.
The two Fidelity experts agreed that it’s a political thorn in the side of renewable energy advocates, with Ms Jaramillo calling for investors to play a significant role in helping to mitigate those problems.
“It is not only through supporting the investment of that infrastructure, but also communicating to companies very clearly what the expectations are,” Ms Jaramillo said.
She also called on greater government involvement to provide guidance, which she feels “will give confidence to investors about where the opportunities are and how fast we are going in that decarbonisation”.
Mr Teo reinforced Ms Jaramillo’s call for greater financial support from government by suggesting a state-issued “low-interest loan” that supports initial capital expenditures, which he feels will speed up the process to reaching net-zero by 2050.
Fidelity’s calls for heightened government support in this arena are underscored by the scale of the projected expenses.
The costs in managing this feat are expected to be enormous, with the International Energy Agency (IEA) projecting the global scale of annual clean energy investment to reach around US$4 trillion by 2030.
Leading management consulting firm, McKinsey & Company, believes the sum will be even greater. Citing the Network for Greening the Financial System’s (NGFS) hypothetical scenario, it said total spend on physical assets on the course to net-zero could reach a stunningly gargantuan US$275 trillion by 2050.
Australia’s fossil fuel industries are on the chopping block too, with the release of Australia’s Long Term Emissions Reduction Plan by Minister for Industry, Energy and Emissions Reduction Angus Taylor in late 2021.
The plan details the Commonwealth’s angle of achieving net-zero with new technologies that come with “no new costs” to households and businesses.
The Morrison government projects the decade-long plan with an existing $20 billion investment in low-emissions technology will “unlock” at least $80 billion of total private and public investment, including clean hydrogen, carbon capture and storage, and energy storage.
But ultimately, it’s the businesses that will be left with paying the tab, especially in the fundamental need to be proactive and innovative – and their stakeholders footing the bills are eager to ensure their investments are getting the desired returns.
