Improved Financing terms could save US$50 trillion as the world decarbonizes: Deloitte Research

• Policy and regulatory initiatives are needed to help strengthen existing international investment structures
• Green projects in Ireland and throughout the world currently suffer underinvestment and higher required return rates because of a perception that green technologies are higher risk
• Improving financing structures and implementation could help drive down the cost of transition to net-zero in 2050 by 25% or US$50 Trillion 

Speaking today from COP28 in Dubai, Stephen Prendiville,  Deloitte Ireland Partner and Sustainable Infrastructure Leader said:

Step change in ambition required for climate initiatives

Prendiville said that Ireland is leading the way in many areas on this front, through a solid legislative foundation in the Climate Action and Low Carbon Development Act 2021, carbon budgets, annual climate action plans etc., but that “we need a step change in ambition even still". 

Savings of up to 25% for sustainable projects

The analysis published¹ by Deloitte last week outlines the potential cost saving of up to 25% for sustainable projects if they had access to what is termed ‘concessional finance’²” This is not a single mechanism or type of financial support but comprises a range of below market rate products used to accelerate a climate or development objective.

Prendiville concluded:

Financing the Green Energy Transition

The Financing the Green Energy Transition report was published last week (28 Nov) in New York. The report goes beyond finance to provide a holistic overview, employing analysis and modelling to consider the technology landscape, policy environment, and a matrixed vision of financing challenges.

 says Jennifer Steinmann, Deloitte Global Sustainability and Climate practice leader.

Failure to close the financing gap could be costly for the world economy—especially the Global South—and make the transition to net-zero inefficient.

To win the race to net-zero, the world must invest wisely and identify areas for cost reduction. 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. 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.

 says Hans-Juergen Walter, Global Financial Services Industry Sustainability and Climate leader.

While the cost to facilitate the transition appears steep, it is far preferable to the alternative—Deloitte’s 2022 Global Turning Point Report found the current policy pathway, coinciding with an increase of 3°C in global warming above preindustrial levels, could result in the loss of US$178 trillion worldwide by 2070 (almost 8% of global GDP). By contrast, the global economy could gain US$43 trillion over the next five decades by rapidly accelerating the transition to net-zero through greater investment in clean energy systems and coordinated policymaking.

Ends

Issued by Murray on behalf of Deloitte  

[1] Financing the Green Energy Transition report

[2] Concessional finance is below market rate finance provided by major financial institutions, such as development banks and multilateral funds, to developing countries to accelerate development objectives. The term concessional finance does not represent a single mechanism or type of financial support but comprises a range of below market rate products used to accelerate a climate or development objective. Climate Explainer: Concessional Finance (worldbank.org)