Horizon 3: the 2040s

4.4 Horizon 3: the 2040s

The key technologies required in the 2040s are currently only at the very earliest stage of development, and are unlikely to move to commercial demonstration within the next decade. Critical regulatory, social and energy price conditions in the wider environment will need to be in place before these are technologically viable, and tested for scalability in the 2030s and beyond. The opportunities, challenges and key actions for firms to consider during the 2040s include:

Key transition opportunities

Developed markets

Innovative technologies to neutralise/address residual emissions in hard-to-abate sectors e.g. agriculture, aviation, international shipping and heavy industry

New business models and technologies to replace finite natural resources (e.g. metals) with circular/renewable options in electricity generation

Scale up of investment into clean hydrogen, CCUS and associated infrastructure required

Key transition challenges Emerging markets

Continued growth in renewables to achieve mass market; opportunities to decommission existing fossil fuel infrastructure and repurpose e.g. hydrogen

New agritech, practices and models to improve yields/food supply to sustain a growing population

Continued sustainable urban development to support growth

CCUS to abate residual emissions from fossils e.g. China

Acceleration of stranded asset risk in emerging markets, as the last fossil producing infrastructure is decommissioned

Further job losses create additional risk of political/civil unrest in markets where supply chains are not yet developed

Population growth and urban expansion place added pressures on agriculture and land use change sectors

Security/stability issues around natural resources move from fossil fuels to metals/mining

Potential challenges in meeting global energy demand with intermittent renewables, if storage solutions and alternative energy sources are not successful

Increasing risks around sustainable, equitable provision of clean water and food to meet population growth

Key actions and mitigations

For governments and regulators

Infrastructure renewal programmes in emerging markets to utilise remaining decommissioned fossil fuel assets and drive continued development in local areas

Regulatory consensus emerges around accounting and disclosure rules for natural capital and biodiversity protection

Global policy co-ordination to develop international action to combat resource scarcity challenges vs growing population, and encourage equitable access to food and water, and use of natural resources

Encourage fund managers to scale-up biodiversity and natural capital funds geared towards restoration and permanent carbon sequestration Drive innovation through PE/VC funding to innovation in nature-based solutions to address residual emissions e.g. agricultural production of methane Focus of impact investing and philanthropic funds moves to just and equitable access to natural resources, clean water, sanitation and food e.g. in growing urban populations in developing economies

Assets: increase ambition for 2050 investment and emissions targets, including scale-up into funds in CCUS, and protection and restoration of natural capital

Liabilities: cease all insurance to any fossil fuel infrastructure/production activities in emerging markets; Continue to focus on underwriting product and pricing innovation to support embedding the net zero economy, with further integration of natural capital assets into risk and pricing calculations, and particular focus on careful consideration of policies around underwriting for natural resources (for example, Lithium, nickel and cobalt are required for EV production and may come under increasing strain without further innovation to reduce dependency)

Clients: Continue to facilitate the net zero economy by providing insurance solutions for new technologies, including expanding to wider product sets around natural capital protection

For investors

For insurers