[Certified ESG Analyst Insights Sharing] Spencer Liu, CESGA
In the 2020s, momentum behind sustainable transportation is unmistakable – from electric vehicles (EVs) to charging infrastructure, we’ve seen a groundswell of adoption and investment. Yet the full sustainability potential across transport modes remains untapped. Emerging solutions like sustainable aviation fuels (SAF), green methanol and ammonia, and e-fuels are gaining some ground, but they continue to carry a green premium: higher capital expenditures and operating costs compared to their fossil-fuel counterparts.
Finance plays an inseparable role in closing this gap. The ability to scale these technologies hinges not only on innovation, but also on access to patient, risk-tolerant capital that can support early deployment, aggregate demand, and eventually drive costs down.
In an ideal world, carbon emissions would be fairly priced, regulatory signals would be clear and stable, and green investments would offer both climate and financial returns. Over time, economies of scale and technological learning curves would shrink the green premium. But in today’s fragmented global context, recent developments are pushing us further away from that equilibrium.
Take maritime shipping as an example. The International Maritime Organization (IMO) recently advanced plans to introduce a global cap on carbon emissions for ocean shipping, including a significant penalty for ships exceeding carbon intensity thresholds starting from 2028. While this is a major step toward internalizing emissions costs, it’s far from universally supported. For example, the current US administration has voiced opposition to these mechanisms, citing concerns about competitiveness and economic burden, adding uncertainty for investors and operators alike.
In addition, an emerging wave of trade protectionism – reflected in rising tariffs on goods – is disrupting supply chains and delaying the cost reductions that green transport technologies, such as EVs, batteries, and clean tech components, depend on. These measures not only raise the cost of deploying clean technologies but also undermine returns on critical infrastructure – such as EV charging networks, battery recycling plants, and low-carbon fuel bunkering hubs – by creating uncertainty around future utilization and demand.
The result is a prolonged vicious cycle that keeps the green premium high and adoption low: green solutions are expensive not just because of high costs, but because the returns are distant, uncertain, and vulnerable to political risks.
- Trade barriers raise deployment costs, making early-stage projects harder to finance and scale.
- Infrastructure build-out lags behind, reinforcing hesitancy. For instance, why commit to deploying electric heavy-duty trucks if fast-charging hubs or grid capacity are not in place?
- Fragmented carbon pricing mechanisms distorts competition. Without consistent, global participation, some players bear the cost of decarbonization while others bypass/ create arbitrages against it.
- Green infrastructure requires long-duration capital, yet returns are often insufficiently de-risked to meet financiers’ thresholds to provide credit.
Despite these challenges, today presents a critical moment for leadership. The costs of inaction – regulatory lock-ins, stranded assets, and geopolitical exposure – are rising. At the same time, first movers in clean transportation are shaping the next decade of supply chains, trade corridors, and capital flows. Here is what businesses and financiers can do to stay ahead:
1. Anchor investments with strategic intent
Businesses should view green investments as enablers of long-term competitiveness, not just short-term returns. Investing in SAF or green bunkering infrastructure, for example, may not yield immediate margins, but helps secure future market access, compliance readiness, and brand value. This also applies to financiers: transition-aligned portfolios require reallocation of capital now, recognizing future fuel cost shifts and regulatory tightening. Integrating forward-looking metrics – such as internal carbon pricing or emissions trajectories – into credit portfolios is key.
2. Deploy blended finance and de-risking
tools
Public-private capital stacks can unlock projects that otherwise fail
conventional hurdle rates. Financiers should work with multilateral banks,
public agencies, and philanthropic funds to design blended finance structures
with concessional or first-loss tranches. These tools have proven effective in
clean energy and are highly transferable to transportation – from bus
electrification to green port infrastructure.
3. Shape sustainable financing principles
through cross-market collaboration
Businesses and financiers can work together across borders to establish
consistent aligned sustainable financing principles. Collaborative efforts – such
as the Poseidon Principles for climate-aligned shipping finance – demonstrate
how cross-market standards can reduce regulatory fragmentation, increase
investment predictability, and create a level playing field.
4. Aggregate demand through alliances
Pooling commitments through coalitions like the First Movers Coalition, Cargo
Owners for Zero Emission Vessels (coZEV), and the Sustainable Freight Buyers
Alliance helps justify infrastructure investments and reduce counterparty risk.
Demand aggregation (while complying with competition laws and regulations)
increases certainty for financiers and enables lower-cost capital deployment.
The transition to sustainable transportation is undeniably complex. Timely investment in infrastructure and technologies, alongside collective demand, would be necessary for such transition to scale and green premium to be reduced or potentially eliminated. For financiers and businesses, the opportunity now lies in designing strategies that reward leadership, hedge against delay, and build the systems we will depend on tomorrow.
This article is written by a holder of the EFFAS Certified Environmental, Social, and Governance Analyst (CESGA). CESGA is a globally recognised qualification whose prominence continues to grow worldwide. CESGA has recently achieved a significant milestone as the first programme accredited by European standard setter EFRAG for compliance with the ESRS sustainability disclosure requirements in the EU (mandatory from 2025). For enrolment details, please visit https://bit.ly/40chuOR.
