The 57th EY Renewable Energy Country Attractiveness Index (RECAI) study estimates that future development to achieve net zero will require a further investment of $5.2 trillion and highlights the role institutional investors will need to play in financing the energy transition.
The study finds that environment, sustainability and governance (ESG) goals are increasingly being prioritized on the investor agenda while institutional investors’ interest in renewables continues to grow.
The forthcoming 2021 United Nations Climate Change Conference (COP26) presents an opportunity to close the gap between what governments have promised to do and the level of action they have undertaken to date. The study 57 finds that current policy and pledge trajectories from leading nations indicate an increased commitment to greater accountability and transparency, with representatives expected to outline clear road-maps and detail on policy measures to spur investment in renewables.
The study also examines green hydrogen case studies in Europe and China that illustrate the great potential of this new technology, but also show the barriers that need to be overcome to reach commerciality and widespread use.
“Discussions on investments in new renewable energy capacities have resumed in Romania. However, the discussions are not enough to re-include Romania in the EY RECAI Top. Investments in new units, possible support schemes and the predictability of the legislative framework could contribute to Romania’s return to the top 40 most attractive countries for investments in renewable energy,” said Mihai Draghici, Senior Manager, Consulting, EY Romania.
There is a clear shift away from fossil fuel investment and toward environmentally sustainable projects by institutional investors who are typically more risk averse in their investing principles. Risk-mitigation tools, structured finance mechanisms tailored specifically to the renewables sector and regulatory commitment would therefore help increase investment flows.
Committed action from COP26 delegates is a must to ensure that the legacy of Paris Agreement is brought to fruition. The leading developed nations must honor existing promises to deliver $100 billion per year in climate financing for developing nations, and all nations must urgently set actionable near-term targets, rather than kicking the can down the road as there is not much road left, EY notes.