Trends Report



Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Winston Churchill

10 November 1942

Dear Reader,

We find ourselves caught between hope and fear.

The year 2022 led to extraordinary progress on the climate crisis. The United States adopted an ambitious new climate law, finally committing the world’s largest economy to decisive action. Europe responded to Russia’s fossil-fuel blackmail by redoubling its own ambitious commitments. A change of government in Australia led to new policies there; likewise in Brazil, a government with appalling attitudes toward the climate emergency was thrown out of office. India is poised to freeze plans for any new coal-fired power plants. We see rising climate ambition in many parts of the world. Indeed, the report you are about to read makes the case that climate change has moved to the centre of global politics, a development long overdue but welcome.

We rejoice in these signs of progress, yet our celebration is tinged with worry. The world is still not moving fast enough. If the stretch goal of the Paris Agreement, limiting global warming to 1.5 degrees Celsius, is to be met, emissions need to be falling sharply every year. Yet they are not falling; they are rising, moderately, from an already high level. The simple reality is that society has not committed itself to writing laws, mobilising capital, revising longstanding practices and building clean machinery at the pace required.

This is the seventh year that our firm, Generation Investment Management, has published the Sustainability Trends Report, with contributions in recent years from our new subsidiary, Just Climate. We submit the 2023 report for your consideration. Sustainability has several dimensions, of course, but given the rising urgency of the climate crisis, it is the primary focus of this work. The report is meant to answer a simple question with complex implications: In the transition to a low-emissions economy, where do we stand? You will learn in this report that for every beacon of hope and progress, another signpost makes clear how very far we still have to go.

The last year proved that immense steps forward really are possible. We need even larger steps, though, and we need them soon.

Al Gore, Chairman
Al Gore
David Blood, Senior Partner
David Blood
01 Year in Focus
For decades, countries have set climate goals that were not matched by policies even remotely adequate to the task. Now, under the impetus of war and of a newfound enthusiasm for industrial policy, the era of serious climate action appears to be at hand.
02 Power
Some countries have made marked progress in weaning themselves off fossil fuels. In Europe, emissions from the electricity sector are expected to fall sharply this year. Worldwide, renewable energy is meeting 80 percent of new power demand, and we may be nearing a global peak in power emissions. A new bottleneck has cropped up, though: years-long delays for renewable projects trying to connect to the grid.
03 Transportation
Electric vehicles are now climbing a rapid adoption curve in the world’s largest automotive markets. The looming problem will be producing enough vehicles to meet the demand. Shortages and high prices for critical battery minerals like lithium and cobalt raise big questions about securing additional supplies. Can we produce the new green minerals in a more ethical way than the old dirty minerals?
04 Buildings
Sales of heat pumps, the critical technology for cutting emissions in buildings, have jumped by double digits for two years running. They are up as much as 50 percent in some European markets, and heat pumps are now outselling gas furnaces in the United States. But governments have made less headway encouraging other types of retrofits, and we are still a long way from a package of policies that will eliminate emissions in buildings.
05 Industry
At long last, we are seeing investment beginning to move into the transformation of industry. Hydrogen announcements are now coming fast and furious; indeed, far more projects have been announced for 2030 than the anticipated market for hydrogen would seem able to support. Even abundant, low-cost hydrogen will be limited in its potential uses. How much of the hydrogen hype actually makes sense, and where does the developing hydrogen economy leave us in decarbonising the rest of industry?
06 Land & Food
Big new commitments were made over the past year to saving the natural world. On the international stage, the most important was a global agreement to halt biodiversity loss and stop deforestation by 2030. Even more important, in the long run, might be binding law adopted in the European Union that seeks to put teeth into such efforts, prohibiting the importation of products of deforestation starting in 2025. The good news, however, was matched by a surfeit of bad: events over the past year created turmoil in the market for offsets,’ projects designed to sequester carbon in forests or elsewhere.
07 Financing the Transition
Investment in the energy transition is rising rapidly. The flow of funds into clean energy is now 70 percent larger than investment in fossil fuels. But much of the increase has been driven by rising enthusiasm for electric cars, and in other sectors, particularly the clean-up of industry, investment is still lagging. We are far from the levels of investment we will need by 2030 to meet the goals of the Paris climate agreement.
08 Looking Ahead
The fate of the planet will be decided in developing countries, where most of the world’s emissions growth is occurring. They are at risk of being left behind in the energy transition. Interest rates for clean-energy projects in these countries are still two to three times higher than in developed economies, and urgent efforts are needed to correct the imbalance.

PDF version