How climate change mitigation is an imperative, a risk — and an opportunity

My colleagues at the MGI and McKinsey Sustainability practice have just released a great major report on the net-zero transition globally — what it will require, what it might look like, what impacts it might have, and how these differ by country and sector. One of the well-known issues is the capital intensity of the transition. Around $9 trillion of physical investment, of which $3.5 trillion is additional to today, will be required across several sectors.

This is an imperative, and it is a challenge. But I’m keen that we also see it as an opportunity. As we outlined in our UK focused article last year, a very small proportion of that $9 trillion will be invested in the UK — but the UK has a strong global position as an exporter of some of the goods and services that feed into the net-zero transition. As long as companies pivot their offerings, this could generate an additional £1 trillion of sales for UK businesses.

There will be consumer-facing opportunities, too. I have historically been quite sceptical about green trends here, for two reasons. First, even with high growth rates, some of the sustainability-driven product and service markets are, on balance, quite niche. Second, I’ve not seen great evidence of (many) people actually paying a price premium for sustainable products.

People do say that they would do so — much more so than I had expected, in fact. And there has been a significant increase in such intentions. As the chart shows, in an earlier wave of the Understaning Society survey, in 2012–14, around 35% of people “Agreed” or “Strongly agreed” with the statement, “I would be prepared to pay more for environmentally-friendly products”. In wave 10 of the survey, conducted in 2018–20, that figure was 46% — an increase of more than 10 percentage points.

That’s almost half of the adult population, indicating that this could be much more than a niche phenomenon. Let’s hope that is the case. [Even though I’m also hopeful that greater levels of innovation in the sustainability space will in fact, over time, drive lower, not higher, prices.]