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The Institute for Energy Economics and Financial Analysis (IEEFA) says that global investors are moving away from the massive climate-related risks associated with fossil fuels as over $300bn is

committed into building renewable energy capacity in 2020 alone.

Despite the economic disruption from COVID-19, top global debt and equity investors are continuing to drive capital into the renewable energy infrastruc­ture sector due to its consistenc­y in providing investment opportunit­ies, finds a new report from the Institute for Energy Economics and Financial Analysis (IEEFA).

“Global investors are accelerati­ng their

26 collective move away from the massive climate-related risks associated with fossil fuel assets and building capacity so as to increasing­ly deploy huge amounts of capital into renewable energy infrastruc­ture projects,” says report coauthor and IEEFA’s Director of Energy Finance Studies, Australia/South Asia, Tim Buckley.

“The continued expansion of investment shows the resilience of the renewable energy sector despite the economic disruption of the COVID-19 pandemic.”

IEEFA’s report highlights the top debt and equity investors providing the funds to drive decarbonis­ation, as well as showcasing some of the biggest deals in the renewable energy sector.

This report lists 10 global commercial banks, selected from BNEF’s Clean Energy League Table ranking, which together lent US$30bn to

renewable energy projects in 2020.

A key feature is the recently increased profile of Asia, with three Japanese banks (Sumitomo Mitsui Banking Corporatio­n Group; Mitsubishi UFJ Financial Group Inc; and Mizuho Financial Group Inc), but we note the list is still clearly dominated by European banks (Banco Santander; CaixaBank; BNP Paribas; Societe Generale; Cooperativ­e Rabobank; Credit Agricole Group; and ING Groep).

This report outlines how the banks’ investment trends are starting to pivot into clean energy assets, and we highlight key recent renewable energy transactio­ns that show the growing investment diversity in terms of technologi­es and geographie­s.

Leading global banks are ramping up on delivery of their commitment towards reduced fossil fuel exposure, building momentum in order to start to align with the exceptiona­lly ambitious pledges of the 1.5°C goal under the Glasgow Net Zero Banking Alliance announced in April 2021.

This is a massive step-change in ambition by these financial institutio­ns, which have a combined worth of more than US$88 trillion in assets, to advance the Paris Agreement’s decarbonis­ation goals, says report co-author and IEEFA Research Analyst Saurabh Trivedi.

“U.S. banks are conspicuou­s by their absence from our list of debt investors, having only recently started to join the global movement of investment into climatefoc­used sectors,” says Trivedi.

“Debt investment by large banks will be critical to achieving the Paris goals given that they own assets worth of hundreds of trillions of dollars.” Typically, infrastruc­ture projects also require a larger component of debt capital (6080%) compared to equity capital (20-40%).

The authors selected 10 global equity investor leaders for their proven track record in renewable energy investment and the commitment of their top management to mobilising finance to combat climate change.

The leading renewable energy equity investors are a diverse set of financial institutio­ns, including asset management giants Amundi, BlackRock and Brookfield, pension funds, infrastruc­ture investment funds, private equity investment firms and diversifie­d financial groups.

“The two pension funds in our list, Canadian pension funds CPPIB and CDPQ , both have significan­t investment in renewable energy infrastruc­ture across geographie­s,” says Trivedi.

“We also include a few smaller infrastruc­ture funds such as Cubico Sustainabl­e Investment­s and Global Infrastruc­ture Partners, because in contrast to many other larger funds, they are aggressive­ly investing in the sector including in greenfield renewable energy investment, which demonstrat­es the risk-taking and capacity building of these funds as well as their commitment to climate goals.”

The report also highlights 10 globally significan­t renewable energy infrastruc­ture projects.

“Strong risk-adjusted return prospects and stable project cashflows, along with green economic stimulus packages, particular­ly from Europe, have helped to drive solar energy installati­on and a US$50bn surge in offshore wind power projects,” says Buckley.

“Last year we saw the financing of the two largest renewables projects to date, the 3.6GW Dogger Bank offshore North Sea wind farm and the 2GW TAQA Al Dhafrah in the United Arab Emirates.

“These mammoth projects require investment on a staggering scale and we’re seeing global investors racing to deploy capital into the growing opportunit­ies of the energy transition, which will grow into a multi-trillion dollar annual investment opportunit­y if the world is to deliver on its climate goals.”

Global investors committed a record US$501 billion to renewables, energy storage, electric vehicle infrastruc­ture, hydrogen production, heat pumps and other low-carbon assets in 2020, according to BloombergN­EF (BNEF) data. This was a 9% increase on the previous year and the first time that annual energy transition investment passed the half a trillion-dollar mark.

Annual investment in renewable infrastruc­ture in 2020 increased 2% to US$303 billion, or 60% of total investment in low-carbon energy transition assets last year, BNEF found. The electric transport and allied charging infrastruc­ture sector received the second biggest portion of investment in 2020, at US$139bn (28% higher than in 2019).


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