Mobilising institutional funding for renewable energy

Nov 18, 2020 04:21 PM ET
  • Fulfilling international climate and also growth goals asks for a substantial shift of resources into low-carbon modern technologies, consisting of renewables. For the world to fulfil the environment goals laid out in the Paris Agreement, complete annual investments in renewable energy innovations would require rise from around USD 300 billion worldwide in recent years to almost USD 800 billion by 2050.

Institutional capitalists-- consisting of pension funds, insurance companies, sovereign wide range funds and also various other endowments and also structures-- stand for a massive global resources swimming pool that has yet to be taken advantage of for the energy transition.

This record from the International Renewable Energy Agency (IRENA) takes into consideration ways to bring in institutional financiers into the industry on the essential range. Its suggestions are focused on plan makers, public capital carriers, capital market regulatory authorities as well as various other stakeholders, including major institutional investors that might channel capital right into renewables.

Large-scale institutional financial investments would properly inject lasting as well as fairly "patient" capital into renewables, decreasing the total funding prices for any type of provided project. Renewable resource possessions, subsequently, can provide institutional capitalists secure, long-lasting, "bond-like" returns.

The effect of the COVID-19 pandemic on international financial and also monetary systems has actually led institutional financiers to try to find brand-new financial investments aligned with healing strategies. This could, consequently, increase resources allowances to renewable energy infrastructure to concurrently hedge versus climate threats.

To name a few searchings for:

  • Regardless of accountancy for USD 87 trillion in assets under administration, institutional investors have actually thus far played a really minor role in funding renewables.
  • Institutional resources still represented simply 2% of overall direct financial investment in renewables in 2018. Around 20% institutional capitalists have actually bought renewables indirectly through funds, while just 1% have actually invested straight.
  • For direct investments, institutional funding shows a preference for fairly familiar modern technologies, such as wind and solar photovoltaic or pv (PV) power generation.
  • Opening institutional resources for renewables on a bigger range needs consolidated activity on several fronts, consisting of regulative and policy solutions, capital market reforms, the creation of bankable job pipes and also modifications of strategy by institutional capitalists.
  • As the climate adjustments as well as emissions come to be a lot more restricted, renewable energy can assist to lower financier exposure to stuck properties.
  • Institutional participation can develop a favorable feedback loophole and assistance to bring in various other sources of funding for renewables.

Download report: IRENA_Mobilising_institutional_capital_2020