Mostafa Monira Firdouse, Green Finance Advisor, FoE (HK)
Over the past decade, there has been a big increase in the use of climate-friendly technologies, which has been even better than expected. Renewable energy sources like solar, wind, and hydropower have become really important and widely available.
The amount of renewable energy being produced globally has stayed steady and has even gone beyond what was expected in 2019. The capacity for renewable power has almost doubled between 2015 and 2020, with solar panels and wind turbines growing the most. Which are often initially financed by blended finance mobilizing private capital at a scale.
These technologies have the potential to reduce up to 90% of human-made emissions by 2050. But there’s still a gap between how ready these technologies are and how much they’re being used commercially. Only 10% of their potential is being fully used. Climate technologies are also more expensive to develop than other technologies, and recent interest rate increases have made it even harder to afford them. While there has been a lot of interest from investors in climate technologies in recent years, it’s been harder to get financing in 2023.
Climate technologies need more money than venture capital firms usually provide, and they’re riskier than private equity and infrastructure funds are willing to support. To make these technologies more widely available, we need a different approach to financing that takes into account their unique characteristics, like the fact that they’re new and sometimes expensive upfront.
We also need public-sector support to lower the cost of
capital and attract private investment. Blended finance models, which combine
public and private money, are important for funding riskier projects in the
early stages, however, each dollar of blended finance should be tagged with a new
types of funds, like infrastructure growth capital and industrial venture
capital funds, to meet the financing needs of climate technologies.