BCG Insights: Investing in Climate Action
Overview
Investing in climate action is not just an environmental necessity but also an economic imperative. This article explores why allocating resources to mitigate and adapt to climate change can yield significant economic benefits and prevent substantial losses.
The Economic Case for Climate Action
The world is on a trajectory to increase global warming by 3°C by 2100, which could reduce cumulative economic output by 15% to 34%. This stark reality underscores the urgent need for substantial investments in climate action. By investing just 1% to 2% of global GDP, we can limit warming to below 2°C and adapt to most of its consequences.
The Cost of Inaction
Failing to address climate change could cost the global economy 11% to 27% of cumulative GDP by 2100. This cost is significantly higher than the investment required for mitigation and adaptation. The economic damages from unchecked climate change could be catastrophic, affecting everything from health to security.
High Returns on Investment
Investments in climate action are not just about avoiding losses; they also offer high returns. Rapid and sustained investments in mitigation (cutting emissions) and adaptation (reducing vulnerability) are essential. These investments need to increase significantly by 2050—nine-fold for mitigation and thirteen-fold for adaptation. The return on this investment is compelling, as it would safeguard economic growth and resilience.
Investing in climate action is a smart economic strategy that can prevent severe economic losses and promote sustainable growth. By committing to substantial investments now, we can ensure a more resilient and prosperous future for all.
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