EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.
How EY can help
-
Through enhanced corporate reporting, EY can support finance teams to meet demands for high-quality enhanced financial and nonfinancial information.
Read more
- Companies should undertake robust scenario planning to help understand the potential implications of a range of climate outcomes and stress-test the current risk management and strategy processes within their business.
- Investors should engage with companies on the need to recast their organizational strategies to incorporate decarbonization and ESG factors. They should also determine a forward-looking view of decarbonization strategies.
While the transition toward a net zero carbon economy presents significant material challenges, efforts by national governments to encourage the transition could also be an opportunity for investors. Ninety-two percent of investors surveyed said they had made an investment during the previous 12 months because they saw that target benefiting from the green recovery.
However, this opportunity could become a victim of its own success. With a potentially limited supply of suitable green investments achieving high sustainability scores from ratings providers, there is a risk of a market bubble: 76% of investors surveyed said the “shortage of supply in suitable green investments will lead to some investors overpaying for green assets, creating the risk of a market bubble.” As we explore in an article on the role of investors in financing the green recovery, there are also other factors that could dampen some of the concerns over a market bubble: the sheer volume of finance likely required to achieve renewables goals and the significant amount of equity capital that will likely need to flow to those organizations in emissions-intensive sectors.