Institutions and investors must close the financing gap to transition to net-zero and mitigate risks surrounding green projects, according to a new report by Deloitte.
The Financing the Green Energy Transition report found that new cost-reducing finance instruments can help de-risk green projects in developing economies while making investing in these projects more attractive. This can be helpful to fuel a global and just energy transition.
The report also found that green projects currently suffer from underinvestment and high required return rates because private investors tend to see green technologies as riskier than alternative investments, highlighting the need for governments, financial institutions, and investors to jointly develop mechanisms to help mitigate risk from green projects.
These can be done by developing blended, low-cost finance solutions to mobilise private investment and help achieve economic growth and climate neutrality—especially in emerging economies.
Moreover, the report findings underline the benefits of taking action, with a projected savings of US$50 trillion through 2050 that could reduce the annual investment needed by over 25%.
The report goes beyond finance to provide a holistic overview, employing analysis and modeling to consider the technology landscape, policy environment, and a matrixed vision of financing challenges.
According to Deloitte, failure to close the financing gap could be costly for the world economy and make the transition to net-zero inefficient.