What are the investments that run the risk of being stranded assets in a net-zero world? What are the investment opportunities as the world transitions to a low-carbon economy? There have been significant policy moves on the sustainability front that will attract keen investor interest in the years to come. In US, the introduction of the Inflation Reduction Act will direct nearly $ billion in federal funding to incentivise low-carbon investments – in areas such as clean energy generation and storage, electric vehicle manufacturing, and carbon capture. In Europe, the REPowerEU Plan will mobilise up to € billion of investment in areas such as renewable energy, storage and energy efficiency, to achieve the 2030 target of a renewables share of 45% in energy production. There are also significant opportunities for sustainable investing in Asia. According to McKinsey’s estimates, net zero by 2050 would require about $ trillion of investment per year. Out of which, around one-third or $ trillion would be in the Asia Pacific. Southeast Asia has high potential for climate action. Estimates from Bain shows that five sectors - renewable energy, electric vehicles, forest conservation, built environment and sustainable farming - account for 60% of Southeast Asia’s carbon abatement potential [7] . For example, renewables such as solar and wind will reach an annual $ billion opportunity by 2030, while electric mobility will be an annual $ billion opportunity by the same period. To meet these needs, we need to catalyse blended financing.
In current, unstable circumstances, what role should the central bank play? Monetary policy should certainly stick to its mandate and ensure price stability in the medium run. In Europe, with financial conditions tighter as a result of the explosion in sovereign spreads, increased uncertainty and loss of confidence, – as shown by the fall in most indicators – there are now more downside risks to price stability. It was therefore appropriate to lower our policy rates by 25bp, a decision reached unanimously by the Governing Council. Second, we need to ensure that the banking system has access to liquidity –what is sometimes called the role of lender of last resort of the central bank. In this respect, the  BIS central bankers’ speeches  3  Eurosystem has confirmed its policy of providing unlimited liquidity – at fixed rates – to the banking system until at least until the end of Q2 2012. Collateral policy has been adjusted to avoid the shocks and liquidity squeezes borne out of rating changes. Dollar funding, based on the existing swap with the Federal Reserve, has also been made easier. Finally, in a period of intense market disruption, it is essential to ensure that the monetary policy transmission mechanism actually works. This may involve temporary and exceptional interventions on those market segments where dysfunctions are most apparent. This is the purpose of the Securities Markets Program (SMP), initiated in May 2010 by the Eurosystem.