24 June 2019
Year on year, the global energy market is changing much faster than anyone could have imagined even a decade or so ago. Despite the strenuous efforts of the fossil fuel industry to push back, alternative energy producers using environmentally friendly sources are slowly gaining ground.
It is not hard to see why: these days there are advantages to investing in the green economy. This is not simply due to the global political trend towards decarbonisation, encouraging disinvestment from fossil fuels; renewable energies are increasingly becoming a better option, mainly thanks to fixed prices that are guaranteed for extended periods of time.
So who is currently investing in green energy?
The International Renewable Energy Agency (IRENA) has analysed the capital flows into the renewables market, seeking to identify the biggest investors in renewable energies. In partnership with the Climate Policy Initiative (CPI), IRENA has produced a report (Global Landscape of Renewable Energy Finance), in which it provides a comprehensive overview of capital flows, broken down by region and technology, and examines the role of public and private finance with the aim of determining the future prospects for the renewable energy market.
Investment in renewables: report findings
The report’s key finding was the significant difference between public and private investment.
The public resources deployed are considerably smaller than the sums invested by the private sector. While this might not come as a surprise, the fact that the world’s major institutional investors (pension funds, insurance companies, sovereign wealth funds) account for the lowest levels of investment in renewables is more striking; over the last three years, their share of total investment in the green economy is less than 1%.
Analysts attribute this to asset size, stating that they are still far too small to attract attention. According to IRENA: “Once developers can present multi-billion dollar portfolios of operational projects, institutional investors may be more inclined to engage”.
The biggest investors in the renewables market are clearly the developers, followed closely by households, firms and alternative fund managers, such as Tendercapital Real Asset Fund. (Click here for more information about the Tendercapital Real Assets fund). Public finance is nonetheless playing a key role, particularly in covering early-stage project risk and helping these new markets to mature.