A jump in import demand for construction materials threatens to rekindle inflationary pressures on global commodities, reversing the current downtrend that began last year. Heightened commodities prices will add to higher input costs for global manufacturers, whose margins are already under pressure from elevated wages. If manufacturers pass on these higher production costs, we could see an increase in goods price inflation. At a time when services inflation is proving stubborn, a resurgence in goods prices will negate the hard-fought gains in the nascent disinflation process. The third uncertainty is fresh shocks to food and energy prices. Lower global food and energy prices have largely facilitated the fall in global headline inflation so far. But the nascent disinflationary trend may be interrupted by a rise in food and energy prices. For instance, in January this year, firm food and energy prices elicited strongerthan-expected inflation outturns. Upside shocks to food and energy prices can emanate from a few sources. Unfavourable weather conditions could dampen agricultural yields. This happened in Asia in January. The fall in OPEC oil output remains a factor underpinning some firmness in oil and gasoline prices. An escalation in geopolitical tensions could contribute to bouts of volatility in commodity prices. So, what does all this mean for financial markets? Financial markets may take a while to adjust to this new regime of higher interest rates, and that adjustment may not be smooth. We witnessed last year how such a disorderly adjustment could unfold, when central banks raised interest rates at an unprecedented pace.

What are the investments that run the risk of being stranded assets in a net-zero world? What are the investment opportunities as the world transitions to a low-carbon economy? There have been significant policy moves on the sustainability front that will attract keen investor interest in the years to come. In US, the introduction of the Inflation Reduction Act will direct nearly $ billion in federal funding to incentivise low-carbon investments – in areas such as clean energy generation and storage, electric vehicle manufacturing, and carbon capture. In Europe, the REPowerEU Plan will mobilise up to € billion of investment in areas such as renewable energy, storage and energy efficiency, to achieve the 2030 target of a renewables share of 45% in energy production. There are also significant opportunities for sustainable investing in Asia. According to McKinsey’s estimates, net zero by 2050 would require about $ trillion of investment per year. Out of which, around one-third or $ trillion would be in the Asia Pacific. Southeast Asia has high potential for climate action. Estimates from Bain shows that five sectors - renewable energy, electric vehicles, forest conservation, built environment and sustainable farming - account for 60% of Southeast Asia’s carbon abatement potential [7] . For example, renewables such as solar and wind will reach an annual $ billion opportunity by 2030, while electric mobility will be an annual $ billion opportunity by the same period. To meet these needs, we need to catalyse blended financing.