Category: Finance

As nations in sub-Saharan Africa advance their industrialization and economic growth agendas, renewable energy infrastructure is increasingly at the forefront of discussion. The cost of solar-battery electricity systems has fallen significantly in the past decade, making renewables the cheapest form of electricity generation in many parts of the globe. Recent African Development Bank projects have shown it to often be the least-cost resource in sub-Saharan Africa as well.

In 2008, as big banks began failing across Wall Street and the housing and stock markets crashed, the nation saw how crucial financial regulation is for economic stability — and how quickly the consequences can cascade through the economy when regulators are asleep at the wheel.

Until now, Adani Green Energy Limited (AGEL) had been focusing on renewable energy capacity expansion through greenfield investments. With this strategy, its renewable energy portfolio grew substantially, from only 0.3 GW in 2015-16 to 14.8 GW in 2020-21. However, recently, it signalled its strong interest in augmenting its renewable energy exposure through acquisitions as well. In May 2021, AGEL acquired SB Energy India, which has 4.95 GW of renewable assets, through an equity purchase worth $625 million (about Rs 46 billion).

Regulated electric utility companies in the United States hold nearly $160 billion in fossil generation assets on their books—investments approved by their regulators that will need to be repaid by their customers. Utilities will likely need to accelerate the retirement of most of these assets or transition them to low-carbon operation by 2030 to meet the NDC emissions target.

The success of China’s diverse policy initiatives in reducing greenhouse gas emissions will play a factor in its progress toward achieving the Paris Agreement. The PBOC has taken the lead on green finance while voicing worries about the stability of China’s financial institutions as a result of substantial systemic exposure to mismanaged carbon-intensive assets. Inevitably, the PBOC will be called upon to play a significant role in roiling the market.

Recovery Bonds link a country’s borrowing to the targeted deployment of capital, designed to facilitate a low-carbon sustainable recovery that can bring economic, social, and climate priorities together. This paper lays out a prospective blueprint to facilitate the issuance of Recovery Bonds, focusing on two potential use cases: sovereign green bonds as part of issuances financing recovery, and bonds linked to fossil fuel subsidy reform (FFSR).

As seen in the EY Power Transactions and Trends Q1 2019 report, clean energy deals continue to dominate the M&A universe, making up 56% of deal volume and 61% of deal value in Q1 2019. Stakeholders across the power and utilities value chain continue to drive the need for more renewables:

With governments in the APAC increasing their focus on developing low-carbon economies, offshore wind is being included as a key component of their energy transition strategies. Several Asian countries such as China and Japan have achieved early success in offshore development. China, which has already surpassed its 2020 target of 5 GW of offshore wind energy, is now looking to achieve 26 GW by 2024. Countries such as South Korea and Taiwan have set ambitious targets while Vietnam and Australia are actively putting in place regulatory frameworks to promote offshore wind.

During the investment segment of the Leaders Summit on Climate last week, President Biden announced the U.S.’s international climate finance plan. The plan outlines how the US will scale-up international climate finance, with some top-level indications of how much they are aiming to provide over President Biden’s first term. These are smart investments for America that will spur clean energy opportunities around the world, reduce the costs of disasters, and help avoid conflicts.

The momentum towards greening the economy implies transition risks that represent new threats to financial stability. The risk of a run on brown assets, similar to that seen during the subprime crisis, can have widespread destabilising effects.