Consultancy giant Deloitte, in its latest report, has stated that green technologies are now being perceived as ‘riskier’ than alternative investments, because of which projects aimed at achieving net-zero goals globally are currently underinvested, despite calls to accelerate climate action.
According to a new report released by the professional services firm, less than USD 2 trillion is invested annually in the transition process. This is far less than the funding required to help put the world on track to meet climate goals.
Deloitte stated that annual investments in the energy sector must range from USD 5 trillion to USD 7 trillion if the world is to achieve net-zero emissions by 2050 or drastically reduce emissions.
“Green projects currently suffer from underinvestment and high required return rates because private investors tend to see green technologies as riskier than alternative investments,” Deloitte noted.
To help reduce the risk associated with green projects, governments, financial institutions, and investors must work together to develop mechanisms, the Deloitte report stated further.
Creating ‘blended, low-cost finance solutions’ is one way to encourage private investment, particularly in developing nations, the study noted.
“Just as we are continually developing solutions and technology to rapidly decarbonise, we must take definitive steps to remove financial barriers to accelerate a just energy transition, especially in developing economies,” Jennifer Steinmann, Deloitte Global Sustainability and Climate practise leader said, while interacting with Zawya.
According to Deloitte, through better financing arrangements and execution, the transition to net-zero can be accomplished at a lower cost and yield savings of USD 50 trillion by the year 2050. Nations need to look for areas where costs can be cut to succeed in the race toward net-zero.
“For instance, less than half of green investments are currently made in developing economies mostly due to greater risks and stricter public budget constraints for energy transition projects,” the report explained, while adding, “However, to reach net-zero, nearly three-quarters of green investments (70%) would need to be made in developing economies by 2030 as these nations look to new, sustainable infrastructures and technologies.”