MANILA, Philippines — Global debt and equity investors continue to pour in capital into the renewable energy sector, which is consistently providing investment opportunities despite the ongoing COVID-19 pandemic, according to the Institute for Energy Economics and Financial Analysis (IEEFA).
Based on the IEFA report “Global Investors Move into Renewable Infrastructure,” global financiers are backing low carbon energy transition assets which are creating investment opportunities and have demonstrated significant resilience amid the COVID-19-induced global economic crisis.
“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,” said Tim Buckley, report co-author and IEEFA’s director of energy finance studies in Australia/South Asia.
“The continued expansion of investment shows the resilience of the renewable energy sector despite the economic disruption of the COVID-19 pandemic,” he said.
IEEFA’s report also highlighted that the top debt and equity investors are providing the funds to drive decarbonization, as well as showcasing some of the biggest deals in the renewable energy sector.
It listed 10 global commercial banks which together lent $30 billion to renewable energy projects worldwide in 2020.
More commercial banks came from Asia, particularly from Japan, namely Sumitomo Mitsui Banking Corporation Group, Mitsubishi UFJ Financial Group Inc., and Mizuho Financial Group Inc., the report said.
The list was also dominated by European banks namely Banco Santander, CaixaBank, BNP Paribas, Societe Generale, Cooperative Rabobank, Credit Agricole Group, and ING Groep.
The IEEFA report also pointed out that banks’ investment trends are starting to pivot into clean energy assets.
It said leading global banks are ramping up on delivery of their commitment towards reduced fossil fuel exposure, building momentum to start to align with the exceptionally ambitious pledges of the 1.5°C goal under the Glasgow Net Zero Banking Alliance announced in April 2021.
Report co-author and IEEFA research analyst Saurabh Trivedi said 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 decarbonization goal.
“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,” he said.
“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,” Trivedi said.
Typically, infrastructure projects also require a larger component of debt capital at 60 to 80 percent compared to equity capital of 20 to 40 percent.
In the Philippines, several big banks have started to adopt green financing and are starting to shy away from lending to fossil-fuel projects.
The Bank of the Philippine Islands (BPI) was the first bank to adopt climate and environmental risk preparedness initiatives, dedicating a sustainable development finance (SDF).