Page 16 - REM Annual Review 2021

REM JULY REM

Global investors turn to green

energy and away from fossil fuels

GLOBAL THE world’s largest global debt and equity inves- (60-80%) compared to equity capital (20-40%).
tors are continuing to invest in renewable energy The leading renewable energy equity inves-
despite the pandemic, driven by the large num- tors are a diverse set of financial institutions,
ber of investment opportunities, the Institute including asset management giants Amundi,
for Energy Economics and Financial Analysis BlackRock and Brookfield, pension funds,
(IEEFA) said in a new report. infrastructure investment funds, private equity
“Global investors are accelerating their col- investment firms and diversified financial
lective move away from the massive climate-re- groups.
lated risks associated with fossil fuel assets and “The two pension funds in our list, Canadian
building capacity so as to increasingly deploy pension funds CPPIB and CDPQ, both have sig-
huge amounts of capital into renewable energy nificant investment in renewable energy infra-
infrastructure projects,” said Tim Buckley, the structure across geographies,” says Trivedi.
report co-author and IEEFA’s Director of Energy “We also include a few smaller infrastructure
Finance Studies for Australia/South Asia. funds such as Cubico Sustainable Investments
“The continued expansion of investment and Global Infrastructure Partners, because in
shows the resilience of the renewable energy contrast to many other larger funds, they are
sector despite the economic disruption of the aggressively investing in the sector, including in
[coronavirus] COVID-19 pandemic.” greenfield renewable energy investment, which
The report lists 10 global commercial banks, demonstrates the risk-taking and capacity build-
selected from BNEF’s Clean Energy League ing of these funds as well as their commitment to
Table ranking, which together lent $30bn to climate goals.”
renewable energy projects in 2020. The report also highlighted 10 globally signif-
A key feature is the recently increased profile icant renewable energy infrastructure projects.
of Asia, with three Japanese banks (Sumitomo “Strong risk-adjusted return prospects and
Mitsui Banking Corporation Group; Mitsubishi stable project cashflows, along with green eco-
UFJ Financial Group Inc. and Mizuho Financial nomic stimulus packages, particularly from
Group Inc.). Europe, have helped to drive solar energy instal-
However, the list is still clearly dominated by lation and a $50bn surge in offshore wind power
European banks (Banco Santander; CaixaBank; projects,” said Buckley.
BNP Paribas; Societe Generale; Cooperative “Last year we saw the financing of the two
Rabobank; Credit Agricole Group and ING largest renewables projects to date, the 3.6-GW
Groep). Dogger Bank offshore North Sea wind farm and
The report found that the banks’ investment the 2-GW TAQA Al Dhafrah in the United Arab
trends were starting to pivot into clean energy Emirates.
assets. “These mammoth projects require invest-
Leading global banks are ramping up on ment on a staggering scale and we’re seeing
delivery of their commitment towards reduced global investors racing to deploy capital into
fossil fuel exposure, building momentum in the growing opportunities of the energy transi-
order to start to align with the exceptionally tion, which will grow into a multi-trillion-dollar
ambitious pledges of the 1.5°C goal under the annual investment opportunity if the world is to
Glasgow Net Zero Banking Alliance announced deliver on its climate goals.”
in April 2021. Global investors committed a record $501bn
This is a massive step-change in ambition by to renewables, energy storage, electric vehi-
these financial institutions, which have a com- cle infrastructure, hydrogen production, heat
bined worth of more than $88 trillion in assets, to pumps and other low-carbon assets in 2020,
advance the Paris Agreement’s decarbonisation according to BloombergNEF (BNEF) data. This
goals, said report co-author and IEEFA research was a 9% increase on the previous year and the
analyst Saurabh Trivedi. first time that annual energy transition invest-
“US banks are conspicuous by their absence ment passed the half a trillion-dollar mark.
from our list of debt investors, having only Annual investment in renewable infrastruc-
recently started to join the global movement of ture in 2020 increased 2% to $303bn, or 60% of
investment into climate-focused sectors,” says total investment in low-carbon energy transition
Trivedi. assets last year, BNEF found. The electric trans-
“Debt investment by large banks will be port and allied charging infrastructure sector
critical to achieving the Paris goals given that received the second biggest portion of invest-
they own assets worth of hundreds of trillions ment in 2020, at $139bn (28% higher than in
of dollars.” Typically, infrastructure projects 2019).™
also require a larger component of debt capital

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