Despite the economic disruption from the pandemic, global debt and equity investors continue to drive capital into the renewable energy space due to its consistency in providing investment opportunities, a report from the Institute for Energy Economics and Financial Analysis (IEEFA) claimed.
The report said last year, the clean energy sector received record investment commitments totalling $501 billion (P25.4 trillion), a 9- percent increase from commitments made in 2019. From the committed $501 billion, 60 percent or $303 billion are allotted for renewable energy projects.
“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,” the report said.
The reports was authored by Tim Buckley, IEEFA director for energy finance studies and Saurabh Trivedi, the group’s research analyst.
IEEFA said apart from the inherent advantages such as relatively higher risk-adjusted returns and stable project cashflows of the renewable sector, new coronavirus disease 2019 stimulus packages of some governments, especially in Europe and South Korea pushed for green investments at the forefront of recovery plans.
The report recognized China as the largest investor into energy transition infrastructure in 2020 at $135 billion followed by the United States at $85 billion. China invested $84 billion for renewable energy capacity and $45 billion into the electrification of transport.
IEEFA said with a commitment to reach net-zero emissions by 2060, China is expected to deliver a record surge in solar capacity installations in next five years.
Last year, the country installed 60.4 gigawatts (GW) of wind capacity and 48.2 GW of solar power projects but also installed 56.4 GW of thermal power plants, the highest level since 2015 — a move seen to be inconsistent with its emissions goal.
Meanwhile, the report also reviewed the coal, oil and gas divestment policies of hundreds of globally significant financial institutions (GSFI) including commercial banks, insurance companies, pension funds, asset management groups, export credit agencies and development financial institutions.
IEEFA said of June 2021, 172 of these GSFIs havey implemented an exclusion policy around coal-based projects and 77 with a policy on unconventional exploration or production of oil and gas.
“While many GSFIs have less stringent fossil fuel divestment policies, IEEFA is seeing clear market-based momentum building towards systematically reducing investment in carbon intensive assets. GSFIs are starting to walk the walk by aligning with policy, and crucially the economics, of renewables versus fossil fuels,” the report explained. – J. Macapagal
