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, according to a report of the Institute for Energy Economics and Financial Analysis (IEEFA).

“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 report co-author and IEEFA’s Director of Energy Finance Studies, Australia/South Asia, Tim Buckley.

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

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 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 $88 trillion in assets, to advance the Paris Agreement’s decarbonisation goals, says IEEFA Research Analyst Saurabh Trivedi.

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“US 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 Trivedi.

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“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 (60-80 per cent) compared to equity capital (20-40 per cent).

Asset management giants Amundi, BlackRock and Brookfield, pension funds, infrastructure investment funds, private equity investment firms and diversified financial groups are among diversified equity investors.

“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.

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, according to BloombergNEF (BNEF) data. This was a 9 per cent increase on the previous year and the first time that annual energy transition investment passed the half a trillion-dollar mark.

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