Climate financing demand estimated at around $7.6 trillion annually through 2050: Report

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Annual investment required to achieve the necessary energy transition is estimated at around $7.6 trillion annually through 2050, according to a report by KPMG.

A report titled “Closing the climate finance gap” by KPMG said climate financing ranging between $5.2 trillion and $11.5 trillion through 2050 is necessary for the transition.

“Taking a doubling of global GDP between 2022 and 2050 (or 2.5 percent CAGR), the mid-point of the above range of $7.6 trillion translates to 5 percent of global GDP through this period,” it said.

According to the report, climate finance supply was estimated at $850 billion in 2021 after trending lower at around $653 billion in 2019 and 2020.

“The supply of climate finance trailed demand by a wide margin and translated to just 0.7 percent in GDP terms in 2019/20 and slightly higher at 0.9 percent in 2021,” the report stated.

Anish De, Global Head for Energy, Natural Resources, and Chemicals (ENRC), KPMG said the climate finance gap needs urgent attention and collective action.

“It will require greater resolve among governments to squarely tackle the intractable issues including reforms in financial markets, rationalization of fossil-fuel subsidies, building institutional capacities, and nurturing vibrant carbon markets. Deeper collaboration at scale among governments, multi-laterals, corporates, and financial institutions will also be crucial,” he said.

The report also highlighted sector-wise climate finance demand. Energy and transport account for a dominant share of climate financing demand with 44 percent and 34 percent shares respectively, it said.

Buildings & Infrastructure accounted for an 11 percent share and industry had a 5 percent share. Other sectors accounted for the remainder 6 percent share.