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Banking & finance
Opinion
Frédéric Rochat
Frédéric Rochat

Macroscope | Amid financial and geopolitical turmoil, climate transition offers unprecedented growth opportunities

  • In a volatile market riled by interest rate rises, banking vulnerabilities and geopolitical insecurity, climate transition is an important long-term investment opportunity

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A welder works at a wind turbine factory in Gansu, China, on March 1. The world needs to switch from fossil fuels to renewables. Photo: Getty Images
Frédéric Rochat

After an inflationary spike resulting from the pandemic and the war in Ukraine, central banks had to raise interest rates. In line with their mandate, they are attempting to slow the economic cycle to bring inflation back to target levels.

While investors are familiar with the context, the current cycle is unusual because it has emerged after a long period of exceptionally low interest rates, followed by a short period of rapid rate increases.
This swift rise has exposed a series of vulnerabilities. The recent collapse of some banking institutions in the United States and Europe reminds us of the fragility of certain sectors. The contraction of bank lending will weigh on economies, and the prospect of recession could become a reality over the coming months.
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Geopolitical insecurity further adds to this fragile financial environment. This all suggests that markets will remain volatile and uncertain for some months.

Although the market environment calls for caution, the climate transition clearly represents one of the most important opportunities for long-term investors.

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Today, powerful forces are at work to encourage and support this vital transition: consumer pressure, regulatory action, the transformation of industrial business models, and fair capital allocation by investors. Government action also plays a part, through public investment programmes and tax credits. The climate transition will be built around four main axes:

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