- Technologies like solar and hydropower remain pivotal in the move to eco-friendly energy sources.
- Financial returns cause some investors to reconsider their ESG pledges, slowing down renewable projects.
- Despite substantial investments, a gap remains to meet global temperature rise targets.
The push towards renewable energy is stronger than ever, with technologies like solar, hydropower, and biofuels leading the charge in our mission to abandon carbon-heavy methods. However, making the switch isn't merely about having the latest tech. It's also about big bucks, as noted by S&P Global’s Vice Chairman, Dan Yergin.
Speaking at the ADIPEC energy conference, Yergin emphasized that some investors are starting to rethink their commitments to environmental, social, and corporate governance (ESG) goals. The reason? Many green projects are stalling, primarily due to financial constraints. As Yergin put it, if you're in the business of managing money, you need to see returns. While there's a genuine desire to support the energy transition and uphold ESG values, returns on investment can't be ignored.
Recent data paints a clear picture. Investors withdrew a whopping $635 million from U.S. sustainable funds in the second quarter alone. In a year, these funds saw outflows totaling $11.4 billion. In a surprising move, even Blackrock, a financial giant, announced the closure of two sustainable bond funds in emerging markets this past September.
The costs are also soaring elsewhere. Offshore wind energy, for instance, now costs 40% more than it did a year ago. Although a significant $1.3 trillion was funneled into energy transition technologies last year, there remains a gap in investment. To reach the critical goal of capping global temperature rise at 1.5 degrees Celsius, the International Renewable Energy Agency believes yearly investments need a serious boost.
In Yergin’s words, the current scenario presents a mix of tech advancements and a reality check on finances. While the U.S. Inflation Reduction Act pours in unprecedented funds, rising capital costs and supply chain expenses make the renewable transition a challenging affair.
WOM Money Picks
Be a part of the winning team | 81% Success Rate.