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The great energy race: challenge and transformation
9/26/2025
(De)carbonization stocktake, and how the clean energy transition meets the great energy expansion
Michael Lewis
Head of Research, ESG
Steffen Kutscher
Head of Stewardship – Standards & Processes
IN A NUTSHELL
- The energy transition is progressing too slowly and unevenly across sectors and countries. This means a meaningful decline in greenhouse gas emissions before 2030 is unlikely.
- Investment in clean technologies is now double that of fossil fuels. However, the deployment of these technologies is sluggish and the sourcing of minerals critical to the energy transition presents long-term supply chain risks for consuming nations.
- The transport and real estate sectors have been laggards in terms of decarbonisation but over the past few years the pace of their clean energy transition has begun to accelerate. This raises the possibility that 2030 targets towards a 1.5°C pathway in certain parts of these sectors might be within reach.
- Government policies, including subsidies, tax credits, and carbon pricing, play a pivotal role in de-risking clean energy projects and attracting private capital. However, divergent climate policies have emerged this year particularly between the U.S. and the rest of the world.
- What seems certain is the increasing frequency and intensity of extreme weather events. Yet, adaptation finance, such as flood defenses, accounts for just 5% of total climate finance flows. This will need to be scaled up rapidly to cope with increasing climate impacts.
Executive summary
The energy transition presents a broad set of investment opportunities, including across the clean energy supply chain. In-vestors should consider diversified exposure to key enablers such as critical minerals, which are essential for technologies such as solar, wind, and battery storage.
The energy transition is progressing at varying speeds across sectors and regions. To respond effectively, investors need to deepen their understanding of these differences, examining both the pace of transition and the underlying economic drivers and barriers. In addition, investors need to consider the regulatory environment and prioritize regions and countries with stable, long-term policy commitments such as clear tax incentives, carbon pricing mechanisms, and streamlined permitting processes, which de-risk investments and enhance capital deployment.
The still high level of global emissions also implies the need to assess physical climate risks and opportunities. This can in-clude engaging with investee companies to assess and disclose physical cliate risk in their operations and supply chains. In addition, investors may explore adaptation strategies and investment opportunities, for example in green infrastructure.