Comment: Address the emerging market net-zero dilemma

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Executives, industry members and investors have been pushing the cause of net zero with increasing urgency in recent years. However, our planet is too diverse to apply the same solution universally without appreciating the intricacies within each region.

The current net zero framework risks leaving emerging economies behind as part of the transition, a move that will not only have devastating social and economic consequences for these countries but will completely undermine the global transition.

The need for a globally integrative transition that takes into account not only industrialized countries but also emerging countries is an issue that we, as an asset manager headquartered in Africa, are particularly attuned to.

While emerging economies are the largest emitters today, they have not yet been responsible for the majority of emissions and will nonetheless face the most devastating effects of climate change.

These regions are facing a huge funding gap to meet the sustainability goals, a position that the pandemic has exacerbated due to the slower economic recovery in emerging markets and less available fiscal firepower. Rebalancing the capital employed in emerging markets versus developed markets is therefore critical if we are all to be successful in saving our planet.

In order to achieve the goals of the Paris Agreement, further investments of $ 2-4 trillion will need to be allocated to emerging economies. It is also estimated that 70% of the 17 Sustainable Development Goals and the Paris Agreement need capital to go to emerging economies; However, 80% of the world’s ESG / sustainable mutual funds are focused on global or developed markets.

There is a need for action to close this funding gap. However, instead of providing incentives to fill this gap, the current environment is motivating investors to part with these emerging markets.


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