The author would like to thank Rachel Teo for her invaluable guidance on this project; Doe Tien Xuan, Matthew Lim, Katy Raven and Liew Weylin, for their insights on decarbonisation solutions and their feedback on the sizing methodology; Trang Chu Minh, for her research and editorial inputs; Shavon Tan, Chelsia Sujadi, Lloyd Lee and Kevin Wang, for their data and modelling support.

Executive Summary

  • A large amount of investment is required to accelerate the low-carbon transition – estimated at US$126 trillion1 from now until mid-century to meet the International Energy Agency (IEA)’s net-zero scenario.
  • To size the resulting investment potential, GIC has evaluated the decarbonisation opportunity based on total addressable market (TAM)2 for mitigation technologies, revenue growth, and technological maturity. The study zooms in on revenue and value rather than financing gaps, which have been the focus of the industry so far.
  • Existing research that assesses revenue opportunities covers only climate solution providers, such as renewable energy companies or electric vehicle (EV) manufacturers, thereby missing the huge potential presented by capital goods providers, as well as raw material and low-emission fuel producers. GIC’s methodology instead accounts for opportunities across the whole value chain and hence produces a more comprehensive view of opportunities.
  • Using a high-dimensional dataset and statistical techniques, we estimate the total incremental investment value3 of the climate solutions supply chain in 2030 to range between US$5-11 trillion, between the IEA’s Stated Policies (STEPS) Scenario4 and the Net Zero Emissions by 2050 (NZE) Scenario5.
  • In the NZE Scenario, electricity networks, sustainable vehicles, electric vehicle (EV) charging infrastructure, solar, wind, lithium, hydrogen, and building heating are among the solutions with the greatest incremental enterprise value. Except for hydrogen and EV charging infrastructure, these are mature solutions that represent investible opportunities today.
  • The fastest growing among larger opportunities include hydrogen, biofuels, lithium, and electricity storage. Biofuels, in particular, offer a currently underappreciated area of growth given their potential to decarbonise a range of sectors, from power generation to aviation.
  • Nascent technologies such as direct air capture as well as hydrogen-powered and electric aviation present interesting opportunities for early-stage venture and growth capital, but technology risks and paths to commercialisation must be managed for these solutions to mature and scale.
  • The majority of climate solutions are expected to see the fastest growth within this decade, while the Asia-Pacific region represents the largest total addressable market due to rapid economic and emissions growth.
  • In our 2030 forecasts, equity and debt account for ~86% and ~14% respectively of the capital structure for the climate solutions value chain. We estimate that within equity, ~83% of value will be in listed equities and the remaining ~17% in private equity, which is significantly higher than the value of private equity compared to listed equity in the broader market.
  • Our research offers a holistic view of the decarbonisation opportunity set, across different technologies, time periods, regions, and asset classes, which can then inform investors’ portfolio management decisions.

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