Advanced Search
MyIDEAS: Login to save this paper or follow this series

The Role of Institutional Investors in Financing Clean Energy

Contents:

Author Info

  • Christopher Kaminker
  • Fiona Stewart
Registered author(s):

    Abstract

    Decarbonising the world?s energy system, moving towards a resource efficient economy and providing energy access for all will require doubling existing investment levels to around USD 2 trillion a year or 2% of GDP. Governments understand that large sums of capital will be required, and many are also realising the need for further recourse to private capital as public finances have become strained in many developed countries. Simultaneously, banking sector provision of long-term finance has become tighter due deleveraging and new financial regulations. With their USD 71 trillion in assets, institutional investors potentially have an important role to play. Given the current low interest rate environment and weak economic growth prospects in many OECD countries, institutional investors are increasingly looking for real asset classes which can deliver steady, preferably inflation-linked, income streams with low correlations to the returns of other investments. Clean energy projects may combine these sought-after characteristics. Yet – outside the major pension funds and insurance companies – institutional investor allocations to clean energy projects remain limited, particularly when it comes to the types of direct investment which can help close the financing gap. Reasons for institutional investor hesitancy include a lack of information and expertise when it comes to the type of direct infrastructure investment required to finance clean energy projects, and a potentially unsupportive regulatory backdrop. These problems are compounded by a lack of suitable investment vehicles providing the risk/return profile that institutional investors need to manage the risks specific to clean energy projects. There are many species of risk, including regulatory risk stemming from a lack of clarity in terms of environmental and climate policy, and retroactive changes to support mechanisms. Progress is being made – with investor groups coming together to use their scale and build their expertise in clean energy investment. From the public and private sectors, actions are underway to scale up green bond offerings, create risk-mitigating public finance mechanisms and co-investment funding structures. These initiatives need to be encouraged, carefully monitored, and expanded where successful.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://dx.doi.org/10.1787/5k9312v21l6f-en
    Download Restriction: no

    Bibliographic Info

    Paper provided by OECD Publishing in its series OECD Working Papers on Finance, Insurance and Private Pensions with number 23.

    as in new window
    Length:
    Date of creation: 24 Sep 2012
    Date of revision:
    Handle: RePEc:oec:dafaad:23-en

    Contact details of provider:
    Postal: 2 rue Andre Pascal, 75775 Paris Cedex 16
    Phone: 33-(0)-1-45 24 82 00
    Fax: 33-(0)-1-45 24 85 00
    Email:
    Web page: http://www.oecd.org
    More information through EDIRC

    Related research

    Keywords: infrastructure; green growth; pension funds; insurance companies; green bonds;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:oec:dafaad:23-en. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.