COP 26: Aspiration and Reality
January 28, 2022
Derwin Jenkinson,& Steven Bryan
The greatest challenge facing the global energy sector is limiting global warming to 1.5-2 degrees above pre-industrial levels by 2030 and achieving net zero by 2050. How will governments facilitate the delivery and funding of the transition to clean energy, given increasing global demand and energy security concerns? While there’s been good progress with some renewable technologies, such as wind and solar, others—including hydrogen, carbon capture, battery storage and EV charging networks—are still at early stages of development, investment and deployment. A sharp acceleration is needed—and must be financed. Governments will need to lead in rolling out regulatory initiatives to fund directly and incentivize private sector investment into these sectors.
Banks, capital markets, investment funds, and corporate sponsors are reallocating significant capital into assets that meet ESG criteria. At the same time, regulatory changes are being implemented to combat “greenwashing” by market participants, including the creation of the International Sustainability Standards Board and new transparency requirements in the EU and UK for fund managers’ ESG investment policies and asset allocation.
Proven returns on renewables as an asset class, combined with reallocation of investment portfolios in line with new ESG regulations and frameworks, suggest that there is no shortage of private capital available.