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The war situation in Ukraine represents a before and after for the economic order and world stability, but it has also brought to light tensions between the countries that put at risk the achievement of the objectives in terms of energy transition of the European Union, creating an uncertain scenario in terms of climate change. Beyond the political pressures to continue the fight to curb global warming, investors have an increasingly important role to play in making progress, as well as an opportunity, given the growing awareness of consumers about the need to modify their consumption habits and contribute to sustainability on various fronts.

Before the invasion, the objective was, in addition to guaranteeing energy security, to implement a transition towards green alternatives before 2050. With the current crisis, this transformation has become even more urgent. Not surprisingly, the plan REPowerEU launched by the European Commission on March 8 marks the objective of reducing by two thirds the great dependence on Russia for energy in the EU, which, although more pronounced in some countries than in others, resorts to Russian gas to cover 22% of its energy supply. The initiative also foresees that this dependency will be non-existent before 2030.

Part of this plan is positive and focuses on energy efficiency, renewables and electrification as priorities. However, until renewables are able to produce enough energy, Russian gas will be replaced by Liquefied Natural Gas (LNG) transported from the United States or the Arabian Peninsula. Germany has already announced the construction of two LNG terminals as part of a far-reaching agreement with Qatar. More worrying still, shale gas production in the United States could increase, with damaging consequences for the climate and the environment. And in addition, the substitution of coal could be delayed, as several countries have already announced, including France and Italy. With regard to nuclear energy, this alternative wins again despite the problems caused by waste and the risks it poses for safety.

The delay towards an energy transition leading to zero emissions cannot come at a worse time because, if action is not taken now, the opportunity to keep the level of warming below 1.5 degrees will be closed. The report of the Intergovernmental Panel on Climate Change (IPCC), published on February 28, went almost unnoticed in the media despite its devastating conclusions for humanity. Both the IPCC and the International Energy Agency (IEA) condemn the CO2 emissions record reached by the energy sector: 36.3 billion tons in 2021, exceeding by 6% the data for 2020, the year of the pandemic. Despite the commitments of 80 countries at the COP in Glasgow, the possibility of achieving carbon neutrality before 2050 will be even more uncertain if we do not manage to eliminate our dependence on fossil fuels soon. And, to top it off, expectations for COP27 in November 2022 have been lowered, precisely because of the crisis in Ukraine.

Given this situation, the role of investors will be key to influencing our progress through sustainable investment and climate finance. BlackRock Chairman Larry Fink, in his letter to investors, shared his belief that current events, including the skyrocketing price of fossil fuels, will accelerate the green transition and make us more cautious about consuming . Energy efficiency in buildings and clean mobility – the promotion of electric trains and cars – are examples of areas that will benefit from the rise in the price of fossil fuels and that will attract the interest and capital of traditional and responsible investors. And regarding the Member States, let us hope that they will show more courage, adopting commitments at the level of Germany, which recently opted to reach 100% green energy before 2035, 15 years before the 2050 deadline.

As has happened so many times in history, the markets can help lead us to a better path when it seems that politically the situation is beginning to entrench. Consumers are increasingly responsible. It is now a question of putting the money where it can work best and where, without a doubt, it will also yield more because the tailwinds have to help a transition that, sooner or later, has to take place.

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