The climate transition: An unprecedented economic opportunity
The global economy is undergoing a transformation unlike anything seen before. By 2050, nearly every part of the world’s capital stock - buildings, infrastructure, transportation systems and industries - must be replaced or retrofitted to align with net-zero targets. This transition is not just an environmental imperative; it represents one of the largest waves of investment in human history, unlocking unparalleled opportunities for economic development, job creation and industry growth.
A multi-trillion dollar shift
The scale of investment in the climate transition is staggering. In 2024 alone, more than US$2 trillion was invested in clean energy, electrification and low-carbon technologies, and this figure is growing every year. Major investors - including banks, pension funds and asset managers - are actively shifting their portfolios towards climate-aligned assets. Governments, too, are accelerating investment through incentives, policy shifts and procurement strategies that drive demand for clean solutions.
The question is no longer if this transition will happen - it’s happening now. The real question is where the benefits of this investment will be realised. Some cities, regions and industries are actively positioning themselves to attract climate-related capital, while others risk being left behind.
Competing for climate investment
The transition to a net-zero economy is igniting a global race for climate investment. Forward-thinking cities and regions are already leveraging their economic strengths to attract businesses, talent and funding in key climate sectors. Those that act quickly and strategically will position themselves as hubs for new industries, while those that hesitate may see capital, jobs, and opportunities flow elsewhere.
A few critical factors determine whether a place will succeed in this competition:
A clear, proactive strategy – Cities and regions that articulate a compelling vision for their role in the climate economy will attract greater investment. This includes clear sector priorities, strong policy signals and well-structured incentives to reduce risk for investors and businesses.
Industry and research partnerships – Collaboration between government, industry and research institutions can accelerate climate innovation. Public-private partnerships, R&D initiatives and industry clusters help create the conditions for rapid scaling of new technologies and business models.
Access to talent and workforce development – Climate-focused industries require new skill sets, from advanced manufacturing to clean energy engineering. Governments and businesses that invest in education, training and workforce transitions will be best positioned to meet this demand.
Strategic infrastructure investments – The deployment of renewable energy, electrified transport and circular economy infrastructure will be critical. Locations with supportive infrastructure - such as charging networks, green hydrogen hubs and climate-resilient urban developments - will have a competitive edge.
Lessons from leading cities
Across the world, some cities have already recognised the economic potential of climate action and are moving decisively:
Copenhagen has positioned itself as a global leader in urban sustainability, pioneering district energy, offshore wind and circular economy initiatives that have driven investment and job growth.
California has leveraged progressive climate policies and investment incentives to attract cleantech companies, creating one of the world’s most dynamic green economies.
Melbourne has developed a collaborative approach through initiatives like the Melbourne Climate Network, fostering cross-sector partnerships to drive climate-sector growth.
What this means for business and government
For businesses, the climate transition is no longer a niche sector - it is reshaping entire industries. Companies that align their strategies with climate investment trends will be best placed to secure contracts, capital and market share. Governments, meanwhile, must actively create environments that enable this economic transformation by shaping policy, supporting infrastructure and fostering innovation.
The next great economic boom will be powered by climate action. Cities, regions and industries that move fast - developing the right policies, making strategic investments, and building strong industry ecosystems - will capture the economic benefits of this transition. The opportunity is enormous, but so is the competition. Now is the time to act.
Econovation helps cities, regions and industries navigate and capitalise on economic transitions. Contact Andrew Wear (andrew.wear@econovation.com.au) for a discussion on how Econovation might be able to help.
This post draws on earlier articles written by Andrew Wear for the OECD and the Melbourne Climate Network. See Local climate action meets economic development: Lessons from the Melbourne Climate Network and Melbourne’s climate sector: A model for investment and innovation.