Transition to a low-carbon economy

The transition to a low-carbon economy is set to spur a massive reallocation of capital as energy systems are rewired. We see the transition’s speed and shape driven by an interplay of policy, technology, and consumer and investor preferences.

The low-carbon transition is unfolding at different speeds across countries and sectors, in our view. And election outcomes in 2024 are triggering shifts in energy, industrial and trade policies. We are closely watching how those policies intersect with rapid technological change to alter the transition path and investment opportunities from here.

We have developed the BlackRock Investment Institute Transition Scenario (BIITS) to inform an assessment, on behalf of clients, of how the low-carbon transition is most likely to play out based on what we know and expect today – and the potential portfolio impact. We aim to track its evolution over time, similar to how we plan to track other mega forces.

We expect tipping points when the relative costs of low-carbon technology fall below those of incumbent sources and when barriers to adoption are low. These tipping points arrive at different times across regions and sectors, resulting in an uneven and multispeed transition, in our view.

Learn more about the framework (for professional investors only)

Emerging markets are pivotal to the global transition to a low-carbon economy but face a shortfall in investment relative to developed economies. Reforms to plug that shortfall could present both opportunities and risks for investors, in our view. Learn more:

Access the report (for professional investors)

We see opportunities as investors pay more attention to climate resilience as an investment theme. Climate resilience refers to the ability to prepare for, adapt to and withstand climate hazards and to rebuild better after climate-related damages. Learn more:

Download PDF report 

We expect inflationary pressures in coming years as higher energy prices combine with increasing capital spending — though this effect may dissipate over time as low-carbon technology costs decline.

We see the growth impact dominated by physical climate damages – and expect this to bolster climate resilience to those damages as a key investment theme. The impact on portfolios depends not only on the timing and size of these shifts but also when markets price them in.

We see opportunities across the energy system — high-carbon and low — to get in front of shifts before markets. The BIITS offers investors a compass to help navigate the transition’s risks and opportunities. It’s our clients’ choice whether to use it in their investment processes. We recognize views on the transition differ.