This analysis tells us the additional investment required to enable the 450 scenario potentially may not be greater than that required to fund the New Policy scenario, in which case it is much more likely that governments will take “some” further action or “significant” further action instead of maintaining the status quo. The implication for businesses is that establishing strategies that better prepare them for the market conditions that underpin a 2oC world may be needed.
Question 3: Has the market reached a tipping point?
The options available for investors to deploy capital are almost infinite, so comparison at a macro level between low-carbon investments and the market as a whole are not particularly useful. However, when we consider particular industries, a picture of risk and return can emerge. A number of individual sectors are likely to be disproportionately impacted by climate-change-related drivers. Power generation, oil and gas, mining, transport, heavy industrial manufacturing (e.g., chemicals, iron and steel, cement) and commercial buildings all face risks to their future competitiveness.
The most obvious sector ripe for disruption based on a response to climate change is the power generation sector, and there is a lot of data that suggests that the tipping point has already been reached.
In 2016, twice as much global funding in the power generation sector was directed into renewable energy as fossil fuels.  This occurred as coal consumption globally is beginning to decline based on decreasing consumption in OECD countries and a flattening of demand in China.  This disruption to the power generation sector has flow-on effects to its supply chains and supporting industries.
Analysis of other sectors is not quite as straightforward. For example, investment opportunities exist in sectors such as transport fuels or commercial property, while industries like cement, iron and steel, and chemical manufacturing are much more dependent on policy drivers to support low-carbon technologies.
What the analysis tells us, unfortunately, is that the answer to our original question of “Have we reached a tipping point?” is “It depends.” When considering an investment, understanding what to invest in and when requires a nuanced assessment of the market drivers that is particular to the industry, the location and in some cases the actual assets. What is clear, however, is that failing to consider the market drivers related to climate change can put investments at risk across a range of industry sectors — with or without policy intervention.