Renewable energy finance: Institutional capital

Investment in renewables must accelerate rapidly, with all available capital sources being activated to finance the transformation of the global energy system. The current state of institutional investments in renewables reveals a large potential that so far remains mostly under utilised, as analysis by the International Renewable Energy Agency (IRENA) shows. A sample of over 5 800 institutional investors and their renewable investments over the past two decades reveals that around 20% of institutional investors have made any investments in renewable energy via funds, while only 1% have invested directly in renewable energy projects. Such direct investments in renewable energy accounted for around 2% of total direct investment amounts in 2018. Scaling up institutional capital will require combined efforts on multiple fronts. Policy makers can implement enabling policy frameworks for increased investments in renewables and lower the specific barriers faced by institutional investors. These include review of institutional investment restrictions and investment mandates, and inclusion of clear sustainability targets. Together with capital market participants, new financial instruments, such as green bonds and funds, can be fostered to help channel institutional capital into renewable assets.

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