According to a report by the Climate Investment Funds and BloombergNEF, worldwide energy investment has been at an all-time high, but developing nations are losing momentum, and private finance may help close the gap because emerging economies are critical to global energy transition. According to the analysis, there are a lot of unexplored prospects for sustainable energy investment. It provides a clean energy funding road map for five nations — India, Brazil, Indonesia, Morocco, and South Africa – to develop by 2030.
The report provides examples of how financial intermediaries are leveraging clean energy investments in emerging nations, with an emphasis on clean electricity and sustainable transportation, from around the world. It also looks at how much money is being raised and spent in these sectors. According to the research, energy transition investment reached a new high of $501 billion in 2020, with the majority of it focused on wealthier countries.
With such investment, there are still challenges around the world. According to BNEF, emerging markets play a critical role in driving energy transition, especially because they will account for 68 percent of worldwide power demand by 2050, underlining the importance of developing clean and renewable energy sources.
In fact, while world energy investment is at an all-historic high, investment in poor countries has fallen. Renewable energy investment in emerging nations declined to $137 billion in 2020, the lowest point since the year 2016 and down from a record of $194 billion in 2016.
“Public climate funding is not an infinite resource,” explains Mafalda Duarte, CEO of Climate Investment Funds. “Unlocking and redirecting major private investment to where it would provide social impact as well as climate action must be one of its important roles.” This will necessitate ongoing innovation, not only in the realm of technology yet also in the world of finance.”
According to the report, development finance institutions may jumpstart development by investing in and joining new markets, as well as through using technology. They can also assist boost renewables in these sectors by expanding the investment chain and optimizing the usage of currently existing instruments, according to the report.
While optimism in renewable power investment is at an all-time high in developed countries such as the United States (U.S.), private investment in renewables in developing countries might be hampered by a lack of sufficient finance and regulatory structures. Funding can also be problematic due to a lack of experience, financial, and other resources.
Green and the sustainable bonds are one approach to assist support renewable energy transformations, but the paper also highlights strategies to boost private financing, as well as programs like leasing back solar installations. These can still be stumbling blocks for what has become established in new markets. Green bonds, for example, are booming like other finance alternatives, although issuance in India is down. Green bonds were offered in the country for $2.7 billion in 2020, down from about $5.5 billion in 2019.