COP28 and beyond: Private financing solutions illuminating the path to global energy transition

The spotlight has once again turned its attention to global deliberations on the urgent need to phase out fossil fuels and devise solutions to achieve ambitious net-zero goals at the annual United Nations climate change conference held in Dubai in 2023. A recurring theme featured this year is a call for greater collaboration to mobilize private capital, closing the investment gap and addressing climate challenges to transition towards a sustainable future at a much greater speed and scale.^[1]

Unlike preceding conferences, the COP28 presidency has uniquely positioned the private sector in climate talks. This deliberate move compels COP participants to confront the crucial issue of determining the role corporations can or should play in the global transition, with many views this as an invaluable opportunity to catalyze real economic change while addressing climate challenges.^[2]

Governments worldwide have placed a specific focus on securing essential capital as they ramp up initiatives to shift towards renewable energy sources. This emphasis extends to developed economies, influenced by high decarbonization cost attributed to the risk premium necessary for borrowing.^[3] According to the 2023 S&P Global Commodity Insights Inflections Reference Case forecasts, an estimated $700 billion per year of renewable energy investment is expected through 2050 to reach net-zero milestones.^[4]

Breakthroughs in technology are continually reshaping the renewable energy landscape. From more efficient solar panels to advanced energy storage solutions, ongoing innovation within the sector is opening new avenues for investment and project development. Recognition of renewables as a resilience strategy has grown exponentially as well, particularly in the face of extreme weather events and power outages, according to a 2023 Deloitte survey,^[5] underscoring their increasing investment potential.

Private capital fills the void in renewable energy financing

The prevailing high interest rates, implemented to curb inflationary pressures across various economies, have exerted an impact on financing volumes within the energy asset sector, widening the existing financial gap. Governments globally are employing a comprehensive strategy, including public and private funding, along with subsidies, to stimulate investment in renewables. In 1H 2023, private equity commitments to renewable energy companies reached $10.4 billion, a 25% increase from 1H 2022.^[6] Renewable energy projects of substantial value, particularly in solar – also a key driver of 1H 2023 financial performance, hold considerable potential for private capital participation, effectively filling the void left by traditional financing.^[7]

As renewable projects grow increasingly attractive and financially viable in the long run, supported by strengthened policies, technological advancements, and enhanced cost effectiveness, they present businesses and investors with an opportunity to mitigate financial risks and optimize capital deployment. A flexible capital solution, such as securities-backed financing from EquitiesFirst, can provide businesses and investors with the liquidity and stability needed to navigate the complexities of financing clean energy projects.

Leveraging securities-backed financing for strategic moves

For investors seeking portfolio diversification, securities-backed financing offers an efficient and cost-effective way to participate in the expanding renewable energy sector. It offers investors liquidity to diversify their positions, enabling strategic moves in a changing energy and economic landscape without sacrificing the upside potential of their underlying holdings. As the demand for clean energy financing grows, EquitiesFirst’s competitive non-recourse, non-purpose capital emerges as an efficient source of funding for those looking to contribute to and benefit from the global transition to sustainable energy.

By leveraging these financing solutions, businesses and investors can unlock the potential for substantial returns while simultaneously advancing the growth of sustainable energy initiatives. The benefits of private funding and the unique structure of securities-backed financing align with the dynamic nature of the renewable energy sector, fostering a more resilient and sustainable future for generations to come.

[1] https://www.cop-28.org/climate-action-innovation-zone/climate-action-needs-gender-focus

[2] https://time.com/6344322/the-role-of-business-at-cop28/

[3] https://www.reuters.com/sustainability/sustainable-finance-reporting/esg-watch-cop28-milestone-terms-ambition-falls-short-finance-2023-12-14/

[4] https://www.spglobal.com/en/research-insights/featured/special-editorial/renewable-energy-funding-in-2023-a-capital-transition-unleashed

[5] https://www2.deloitte.com/uk/en/insights/industry/renewable-energy/renewable-energy-industry-outlook.html

[6] https://about.bnef.com/blog/renewable-energy-investment-hits-record-breaking-358-billion-in-1h-2023/

[7] https://about.bnef.com/blog/renewable-energy-investment-hits-record-breaking-358-billion-in-1h-2023/

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