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The net zero transition will require $3.5 trillion in extra investment each year, McKinsey estimates

January 25, 2022, 11:50 AM UTC

Good morning.

As ever more companies commit to a “net zero” transition by 2050, it’s worth asking: How much is that transition going to cost?

An army of McKinsey researchers have come up with a plausible estimate that they are releasing today. It’s a big number: $275 trillion in capital spending on physical assets by 2050, or $9.2 trillion a year. Of course, a lot of that investment is already happening. But McKinsey says the increase in investment needed would be $3.5 trillion a year.

That’s a lot of money. To put it in perspective, it’s roughly one half of all global corporate profits, one quarter of all tax revenue, or 7% of household spending. The McKinsey report is silent on who picks up the tab.

In addition to all that spending on physical assets, the climate transition also will lead to human disruption: an estimated loss of 185 million jobs by 2050, offset by a gain of 200 million new jobs. That means no shortage of jobs, but a challenge to provide “needed support, training and reskilling” during the transition.

Now you may look at those numbers and be tempted to say: “Whoa, let’s not do it, and save the cash.” But there’s a cost there, too. First movers will benefit by reaping profits from the transition, while latecomers will pay an added price. A separate study out this morning from Deloitte concludes insufficient action on climate “could cost the U.S. economy $14.5 trillion in the next fifty years,” and the loss of nearly a million jobs. “We have a narrow window of time—the next decade—to make the bold decisions needed to change our climate trajectory and reach a turning point,” said Alicia Rose, deputy CEO for Deloitte U.S. “The decisions made by governments, businesses and communities would reinforce our early progress and could unlock extraordinary economic possibilities for the U.S.”

Separately, check out this week’s Leadership Next podcast—an interview with Steve Case, CEO of Revolution, an investment fund dedicated to building start-ups in places other than San Francisco and Austin. Case, who made a fortune running AOL, says the pandemic has “broken the lock” that Silicon Valley and a few other places had on new tech investment, allowing talented people “to think about work and life in a different way.” 

Case makes the case for my hometown of Chattanooga, Tenn., as one of his proof points. “Chattanooga is actually proving to be an interesting startup city,” he said, thanks to an early investment in high-speed broadband and a heavy concentration of trucking and logistic companies. “It’s the best place to launch a start-up focused on trucking.” You can listen to the podcast on Apple or Spotify. More news below.

Alan Murray


Google suit

Four U.S. state attorneys general have teamed up to sue Google for allegedly tricking consumers into handing over their location data with so-called dark patterns—manipulative user-interface design choices that are rapidly becoming a prime target for regulators around the world. Washington Post

Binance AML

Binance, the world's biggest crypto exchange, has reportedly been operating weak anti-money-laundering controls and not being entirely transparent with regulators about its finances and business structure. Chaopeng Zhao, its founder and CEO, has hit back against the allegations, claiming they come from "people who were let go from Binance and partners that didn’t work out [who] are trying to smear us." Fortune

Monoclonal antibodies

When Omicron appeared, there were concerns it could prove resistant to the monoclonal antibody treatments given to some COVID patients by IV drip. Now the FDA has yanked its authorization for Eli Lilly and Regeneron's monoclonal antibody treatments, because of that problem. Note: GSK says its monoclonal antibody treatment continues to work against Omicron. Financial Times

Unilever shift

After activist investor Nelson Peltz took a stake in Unilever, the consumer goods giant has suddenly decided to cut 15% of its senior managerial posts. It will also make ice cream (featuring brands such as Ben & Jerry's and Magnum) an independent unit. Fortune


"Stealth Omicron"

The sub-variant known as "stealth Omicron" (a frequently misinterpreted nickname that means it's relatively hard to classify, not that it evades tests) is now definitely in the U.S., with nearly 100 confirmed cases across multiple states. Is that a big deal? Still hard to tell—sub-strains appear all the time—but it is taking over Denmark. Fortune

Spotify ultimatum

Neil Young has told Spotify to remove his music, because of the presence of vaccine-misinformation emitter Joe Rogan on the platform. "I am doing this because Spotify is spreading fake information about vaccines—potentially causing death to those who believe the disinformation being spread by them," the rocker said. "They can have Rogan or Young. Not both." Fortune

Nasdaq fall

Fortune's Shawn Tully reckons the Nasdaq still has a way to fall before it hits bedrock: "The powerful momentum driving tech's shooting stars ever skywards is finally surrendering to market gravity. The 'innovation-at-any-price' high spirits that sent the Nasdaq shooting into the stratosphere over less than three years, is giving way to the realization that its members can't grow profits nearly fast enough to give you a decent return." Fortune

Free Facebook

Facebook software problems have been leading to many people in developing economies—where the company promised them free use of its services—being charged for their Facebook data nonetheless. The problems were flagged up internally, but Facebook has reportedly done nothing to fix them. Wall Street Journal

This edition of CEO Daily was edited by David Meyer.

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