The heat is on for energy transition investors

One hundred trillion dollars. This is the vast amount we believe the world will spend by 2050 to decarbonise the global economy. It reflects the sheer scale of the energy transition and the investment opportunity.

- Tan Min Lan

Consider this: It took about 50 One hundred trillion dollars. This is the vast amount we believe the world will spend by 2050 to decarbonise the global economy. It reflects the sheer scale of the energy transition and the investment opportunity.

Consider this: It took about 50 years to shift from wood to coal, and another 50 years to move from coal to oil as the main energy source globally. Today's industry scale, coupled with our extreme reliance on energy, makes this transition the most complex in history.

So, achieving governments' net-zero targets will take years of hefty investments in transforming the energy status quo. This isn't just about adding renewable capacity, although that is a big part of this story. It's also about overhauling grid infrastructure, developing new energy sources, mining more metals, and crucially, managing fossil-fuel production and supply for economic consistency.

For investors, this multi-decade trend has important portfolio ramifications - including in the near term.

TRANSITION CHALLENGES

This transition is indeed formidably complex. The Organisation for Economic Cooperation and Development has forecast that global gross domestic product will almost double by 2060, as economies, urbanisation and infrastructure needs expand. Global primary energy consumption has doubled in the past 40 years. It should rise further over the coming decades as richer households demand ever more power.

The key question is how and how quickly carbon emissions are reduced. After all, many top emitters are not easing off. As burning fossil fuels (coal, oil and natural gas) still accounts for over 80 per cent of energy supply and nearly 90 per cent of total carbon dioxide emissions, this is where emission-reduction strategies are focused.