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Reaching net-zero will require $5 trillion every year for the next 30 years, says BoA report

Reaching net-zero will require $5 trillion every year for the next 30 years, says BoA report

Ahead of COP26, Bank of America Global Research has issued a net-zero primer and stocks picks report, which predicts that $5 trillion will need to be invested every year for the next 30 years, if global emissions targets are to be reached.

The total cost of the transition, predicts Bank of America, will be $150 trillion - that’s three times the value of the Covid-19 stimulus bill this decade.

What’s more, decarbonisation efforts could boost global inflation by up to 3% a year as central bank balance sheet funding rises by $500 billion per annum.

“It’ll certainly be expensive,” reads the report, “but we believe it can be done with technology, the economy, markets and ESG joining forces.”

The cost of inaction, however, could even be more significant: over 3% of GDP could be lost every year by 2030, growing to $69 trillion by 2100, says Bank of America Global Research. In addition, around 5% - approximately $2.3 trillion - of global equity stock market value could be wiped out by climate policy re-pricing, with a “potentially extreme hit to corporate earnings for certain sectors.”

For some sectors, however, the transition will create opportunities. Enablers like renewables, hydrogen, electric vehicles, sustainable batteries, biofuels, and industrials, can expect a deluge of investment.

With a combined market cap of over US$1tn, and significant exposure to climate solutions, here are Bank of America’s stock picks to buy ahead of COP26:

Renewables (US, EMEA, APAC)

  • NextEra Energy - leading US renewable utility
  • Enphase Energy - solar modules/inverter
  • Vestas - leading wind turbine maker
  • E.ON - electricity network distribution
  • EDPR - renewables/onshore wind
  • Acciona - EU renewables
  • Xinyi Solar - China solar glass

Industrials (Energy Efficiency, Electrification)

  • Kingspan - building insulation/energy efficiency
  • Sika - green building/infrastructure
  • Norsk Hydro - hydro-electricity aluminium producer/lower carbon/recycled products
  • Generac - backup/portable power generators/solar energy storage
  • WEG - LatAm decarbonisation/renewable sources/fleet electrification
  • Waste Connections - recycling services, methane capture, landfill gas to renewable energy

Hydrogen (Industrial Gases, Electrolysers)

  • Air Liquide - industrial gas/hydrogenics
  • Nippon Sanso - Japan industrial gas/CCS
  • Siemens Energy - renewables/transmission/hydrogen electrolysers

Biofuels (Ethanol, Biogas, Biodiesel)

  • Raizen - Brazil bioenergy/biofuels/Cosan/Shell JV
  • Neste - EU renewable biodiesel

Electric Vehicles (EVs, Batteries)

  • CATL - leading global lithium battery maker
  • Samsung SDI - Korea lithium ion batteries
  • SK Innovation - Korea EV batteries
  • NIO - China EVs maker
  • XPeng - China smart EVs
  • BYD - China EV brand and EV battery maker
  • Lucid - Tesla/Ferrari of new EVs

Energy Transition (CCS)

  • Aker Carbon Capture - pure-play CCS

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