Concrete ways to boost finance for sustainable energy

Concrete ways to boost finance for sustainable energy

Innovative financial mechanisms in four key areas have the potential to boost crucial investment in sustainable energy by some $120 billion a year in the near term, an expert report from the Sustainable Energy for All (SE4All) initiative shows.

Investment from both the public and private sectors will need to triple to more than $1 trillion per year to meet SE4All’s ambitious goal of sustainable energy for all by 2030, according to latest estimates.

Developing countries face particular challenges in mobilising finance, ranging from investors’ risk perceptions and an inadequate pipeline of bankable projects, through to weaknesses in the regulatory framework and other basic conditions needed to set the stage for investment. Even in the developed world, investors can encounter regulatory and policy challenges in financing sustainable energy.

The report by the Finance Committee of SE4All’s Advisory Board, ‘Scaling Up Finance for Sustainable Energy Investments’, identifies four broad ‘investment themes’ where action could help drive increased investment:

– developing the Green Bond market

– using Development Finance Institutions’ (DFIs’) de-risking instruments to mobilize private capital

– exploring insurance products that focus on removing specific risks

– and developing aggregation structures that focus on bundling and pooling approaches for small-scale projects.

Action across these four themes, along with mechanisms to speed up project development, could increase investment for sustainable energy in both the developing and the developed world by a total of some $120 billion a year towards SE4All’s three target areas of energy access, energy efficiency and renewable energy, the report says. It also calls for the development of a pipeline of bankable energy projects.

“These should not be the only areas of focus for SE4All, and do not address the total funding gaps identified. They do, however, represent near-term, achievable opportunities,” it says.

Of that total, the report sees potential to raise $35 billion through further expansion of the Green Bond market to drive fresh capital into new sustainable energy investments, particularly into the project bond market and asset-backed Green Bonds.

Developing tailored structures that allow the private sector to co-lend with DFIs in emerging markets could help raise a further $30 billion.

 

Source: Sustainable Energy For All

Date: July 2015

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