Photograph of electric vehicle being charged in front of a field of windmills.

Financing the transition to net zero

As the business community races to reduce its carbon emissions, enormous amounts of capital will be required to retool assembly lines, retrain workers and reimagine how the global economy operates

The transformation from a carbon-intensive economy to a net zero emissions one — necessary if humans are to slow the acceleration of climate change and preserve a sustainable environment — won’t be easy or cheap. By 2030, global investment in renewable energies must triple to $4 trillion per year.footnote1

Within the same time frame, six of every 10 new car buyers globally must drive off the car lot in electric vehicles. By 2035, internal combustion cars — 95% of automobiles sold today — must be out of production entirely. Those ambitious proposals from the IEAfootnote2 reflect a growing global commitment to reduce carbon emissions to net zero by 2050.

Bank of America global head of Sustainable Finance Karen Fang

"The capital needed to transition to a net zero economy is available."

— Karen Fang, Global Head of Sustainable Finance at Bank of America

Government policies can’t bring about the necessary changes on their own. Since 1992, when more than 150 nations signed on to the United Nations Framework Convention on Climate Change, global carbon emissions have risen by some 60%.footnote3 Transforming global industry will require the expertise, partnership and resources of the public, private and nonprofit sectors. Working together, their combined strengths and experience will help ensure a more efficient, faster transition to a more sustainable world. “The capital needed to transition to a net zero economy is available,” says Karen Fang, global head of Sustainable Finance at Bank of America. “And the private sector is capable of organizing and deploying it at scale.”

Funding a transforming world

Powering that change will be massive investments — as much as $1 trillion to $2 trillion per year in the United States alonefootnote4 — in new equipment, materials, production facilities and training. While those numbers may seem daunting, the capital is available.

Net Zero Infographic

Headline: The opportunities a healthier world can bring

Caption: The transition to a net-zero world calls for a historic shift in energy use and production chains and trillions in new investments across all sectors. The International Energy Agency has set a target of investing $4 trillion a year in renewable energy by 2030, triple the current level. Here are just a few examples of what’s needed:

60% of global new car sales must be electric vehicles (EVs) by 2030

Adjacent illustration is an electric vehicle at a charging station.

$90 billion

Annual investment needed to expand public EV charging stations from 1 million to 40 million by 2030

Two circles with blue fill, representing 9% of electricity powered by solar and wind in 2020 and 68% electricity powered by solar and wind in 2050.

$1.6 trillion

Annual investment in electricity generation in 2030 vs. $500 billion per year today

50% of fuels used in aviation must be low-emissions fuels by 2040

Adjacent illustration of an airplane in flight

$140 billion

Annual spending on low-emissions fuel supply, such as hydrogen and bioenergy, by 2050

Source: “Net Zero by 2050: A Roadmap for the Global Energy Sector,” International Energy Agency, October 2021.

In 2021, at the United Nations Climate Change Conference (COP26), the Glasgow Financial Alliance for Net Zero (GFANZ) announced a $130 trillion commitment over the next 30 years to funding net zero solutions from the financial services sector.footnote5 Bank of America, for example, deployed $150 billion to environmental finance efforts in 2021 alone,footnote6 part of an overall $1.5 trillion sustainable finance commitment through 2030. Since 2007, the bank has already deployed more than $350 billion to low-carbon business activities supporting clients. Bank of America’s $1 trillion commitment to advance an environmental transition spans across sectors to help build more solutions in areas like energy efficiency, renewable energy, sustainable transportation, resource efficiency, sustainable water and agriculture and improved forestry and pollution control measures. “The private sector will be essential in innovating solutions to new environmental and social challenges as they arise,” says Alex Liftman, global environmental executive at Bank of America.

Global Environmental Executive at Bank of America

"The private sector will be essential in innovating solutions to new environmental and social challenges as they arise."

— Alex Liftman, Global Environmental Executive at Bank of America

Providing that support will be critical, as individual companies will need to demonstrate measurable progress towards net zero as they seek financing. “If you’re a traditional energy company thinking about how to develop renewables,” says Fang, “we’ll help you build a plan for solar and wind.”

A route to sustainability

For an undertaking that involves nothing less than transforming the global economy, no industry or company can be left to figure things out on its own. “While financing is critical, so, too, is education,” says Fang. Business groups, governmental agencies and nonprofits offer a growing array of educational resources tailored to individual industries. For example, the U.S. Green Building Council (USGBC) advises developers on how to include environmentally efficient systems in buildings, helping to make communities and cities more sustainable.footnote7

Because of their financial reach and expertise, global banks have a unique role to play in that education process. Bank of America has established a carbon advisory program to teach business clients about climate-related products and services. The group takes a holistic look beyond financing the transition, including the impact of jobs in high-carbon industries such as coal or oil phasing out. Some 65 million new jobs could emerge in the next decade,footnote8 requiring new technical skills and training.

“Every business has unique challenges. We go across the spectrum of clients, to understand what their businesses are, and where their sustainability opportunities are,” adds Fang. To better support clients that need guidance along with financing, bank employees are receiving training on climate awareness and how to help specific industries decarbonize. High-emitting industries — steel and cement production, for example — will need help implementing technologies such as carbon capture. Instead of CO2 being released into the atmosphere, emissions are captured and transported to areas where they can be safely stored underground, or repurposed to create building materials, industrial chemicals and other products.footnote9

“Other businesses will need guidance and financing to electrify their fleets of cars and trucks, or retrofit their buildings,” says Liftman. The aviation industry, for example, will require significant investment in sustainable fuels and more efficient planes. While the costs are significant, the cost of inaction is even greater. In a business-as-usual scenario, aviation alone could use up to 10% of the planet’s remaining global carbon budget by 2050.footnote10 “We are very engaged with all of our clients because we see opportunities across all sectors, but in particular, with clients in high-emitting sectors,” adds Liftman.

A shared commitment

Individually, companies can contribute to achieving net zero in many different ways, and Bank of America’s commitment to the environment is long-standing. In 2005, it was the first U.S. bank to announce a Scope 1 and 2 greenhouse gas emissions reduction goal with the Environmental Protection Agency Climate Leaders program. In its operations, it achieved carbon neutrality in 2019, a year ahead of schedule, and in 2021 it set a goal of net zero before 2050. In April 2022, Bank of America announced its 2030 targets for reducing emissions associated with financing activities related to three key sectors: auto manufacturing, energy and power generation. The targets are outlined in the company’s Approach to Zero™, which details Bank of America’s net zero greenhouse gas emissions approach and target-setting process.

A collective, global effort combining the commitments of all companies and industries can greatly accelerate progress toward net zero, however. Through collaborative efforts such as GFANZ, Bank of America and more than 450 other firms representing $130 trillion in assets are working together to put the power of capitalism to work at an unprecedented scale to address climate change. Addtionally, the Partnership for Carbon Accounting Financials (PCAF), formed in 2020, is developing more precise ways to measure and disclose greenhouse gas emissions that result from financing of businesses. “In collaboration with other financial institutions, we helped create the Global GHG Accounting and Reporting Standard for the Financial Industry, providing a consistent methodology to assess and disclose emissions associated with financing activities,” says Liftman.

According to Fang, clients are increasingly embracing net zero planning across a wide spectrum of sectors. “Even though net zero is a new journey for all of us, I have yet to find clients resisting it,” she says. “The taxonomy can be confusing, but they are actively engaged, and open to help, in making the transition.”

Net zero financing will be an essential tool as the world embarks on its countdown to creating a net zero world by 2050. Bank of America is committed to putting the power of capitalism to work to address not just the challenges facing the environment, but also those that contribute to inequity in health care, economic opportunity and access to education, as well as other contributors to social inequality.

Learn more about Bank of America’s commitment to Sustainable Finance.

International Energy Agency, “Net Zero by 2050: A Roadmap for the Global Energy Sector,” May 2021.

1

International Energy Agency, “Net Zero by 2050: A Roadmap for the Global Energy Sector,” May 2021.

2

Energy Transitions Commission, “Making Mission Possible: Delivering a Net-Zero Economy,” September 2020.

4

U.S. Green Building Council, “LEED Zero.”

7

United Nations Economic Commission for Europe, “Technology Brief: Carbon Capture, Use and Storage (CCUS)” March 3, 2021. 

9

4/28/2022