Horizon 2: the 2030s

4.3 Horizon 2: the 2030s

The key technologies required in the 2030s are currently only at the earlier stages of maturity, but will be moving from PE/ VC funding to commercial demonstration in the coming decade in order to develop and test business models for market entry in the 2030s. Key opportunities, challenges and actions for firms to consider during the 2030s include:

Key transition opportunities

Developed markets

Electrification of heavy transport and haulage

Develop low carbon fuels and solutions for Aviation

Scale up investment into CCUS and Green Hydrogen

Develop solutions for electrification of heavy manufacturing and industrial processes

Roll-out urban projects e.g. smart cities with smart grids, electric mobility, smart buildings

Expensive retrofitting needed in traditional cities

Key transition challenges Emerging markets

Continued roll-out of renewable infrastructure

Develop fossil plant decommission plans, and test business models to repurpose e.g. Blue hydrogen w/CCUS

Build sustainable urban infrastructure, services and housing; inc. medium sized cities to reduce distances, promote inclusivity, jobs and income diversification

Transport network upgrades and electrification to support economic growth and urban development

Job losses from shifts to new models - 71 million jobs estimated at risk in move to circularity; greater impacts in areas where local economy is more material-intensive; jobs in manufacturing expected to decrease globally;

Resource scarcity challenges around natural resources, e.g. copper, nickel, cobalt required for electrification

Health issues around urbanisation and growing risk of air pollution; 37% of the projected urban growth will be in India, China and Nigeria. Cities drive 70% global CO2; expansion of slums; lack of proper housing and basic services;

Environmental risks of scaling up new technologies into emerging markets, if not supported by sufficient safeguards; financial risks around pricing in local currency, reliance on domestic demand, counterparties and less developed risk management processes

Key actions and mitigations

For governments and regulators

Improved standardisation of regulation around emissions accounting and carbon markets; introduction of further standards around natural capital disclosures and accounting

Global policy co-ordination to harmonise and allocate resources, reduce financial risk, enable continued investment in transition whilst removing loopholes in cross-border energy imports/exports

Emerging markets skills programmes to build local capabilities across sectors; collaborate with local communities to develop shared benefits models around local infrastructure changes

Encourage fund managers to further scale-up provision of funds with just transition objectives and emerging markets focus Drive innovation through PE/VC funding into new climate/green tech solutions, new circular business models e.g. around metals, mining, end-user manufacturers and consumer goods sectors to combat waste of natural resources

Impact investing: in emerging markets services that promote asset-sharing, maintenance, and lifetime extension Blended finance e.g. Urban Planning Santiago and Bogotá electrified public transport via public-private JVs Natural capital: key focus on new and evolving products and propositions to support integration of valuation metrics around natural capital into investment processes

Assets: increase ambition for 2040 investment and emissions targets, including scale-up into funds in emerging markets to support energy infrastructure change, protect natural capital and create jobs

Liabilities: continue to monitor transition pathways for relevant product lines to adapt forward-looking view of your underwriting portfolio, increase focus on development and scale-up of both emerging markets and natural capital focused solutions, commence timeline for reducing underwriting of fossil fuel infrastructure/ production activities in emerging markets; embed ESG and natural capital asset pricing into BAU

Clients: continue to monitor transition impacts across policies engage with client base to inform them of their forward-looking risk profile, use learnings from the 2020s to educate clients on insurance related transition considerations, such as fire protection and response standards for Lithium-ion batteries37 as they scale up to achieve mass market adoption in the 2030s

For investors

For insurers

37 Marsh, April 2022, https://www.marsh.com/ma/services/risk-consulting/insights/fire-protection-and-property-insurance-considerations. html, Gcaptain, February 2022, Lithium-ion Batteries From Electric Vehicles Aboard The Felicity Ace Are Keeping The Fire Alive (gcaptain.com)