Global investors are continuing to drive capital into the renewable energy infrastructure sector
Post date: 20/07/2021 - 12:00
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), which include PV, wind and storage. »Global investors are accelerating their 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 Tim Buckley, co-author and IEEFA’s Director of Energy Finance Studies, Australia/South Asia.
The Top 10 debt investors and global commercial banks together lent $30 billion 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 IEEFA note that the list is still »clearly dominated« by European banks (Banco Santander, CaixaBank, BNP Paribas, Societe Generale, Cooperative Rabobank, Credit Agricole Group, and ING Groep). »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 climate-focused sectors,« says Saurabh Trivedi, co-author and IEEFA Research Analyst. »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 (60 to 80 percent) compared to equity capital (20 to 40 percent).
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.
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 $50 billion surge in offshore wind power projects.«
Global investors committed a record $501 billion to renewables, energy storage, electric vehicle infrastructure, hydrogen production, heat pumps and other low-carbon assets in 2020, says IEEFA, citing BloombergNEF (BNEF) data. »This was a 9 percent increase on the previous year and the first time that annual energy transition investment passed the half a trillion-dollar mark.«
»Global Investors Move Into Renewable Infrastructure« is available free of charge as PDF (56 pages) at »www.ieefa.org«.