Today's Edition
KHALED AL KHAWALDEH (ABU DHABI)
With the global push towards energy transition intensifying following last year’s COP28 agreement, so too has the demand for capital to finance these projects. According to experts speaking at the World Future Energy Summit (WFES) on Wednesday, the problem lies in a lack of standards and global frameworks, rather than shortages in capital.
“If you look at figures from the UN, they say that before 2030 we need to invest $30 billion a year, and the world bank says something like 80% of that needs to come from the private sector. If we are to succeed, we really need to bridge this gap”, Dusko Stjepanovic, the Head of Green Banking at the Renewable Energy and Energy Efficiency Partnership, told attendees at the Abu Dhabi National Exhibition Centre (ADNEC).
“The problem is that regulations are locally tailored and implemented, this means for global companies we have to start from scratch in each new financing operation we start in a new country.”
Stjepanovic explained how this had meant that much of the work that had been done to create mechanisms that could leverage risk from green energy projects that utilise new technologies, or those in developing economies could not be transferred. This meant that banks and financiers had to forego substantial manhours and capital just to see the transactions through each time.
“There is no global framework or incentives that would move this from a voluntary market to something more permanent and concrete,” he said.
“This global framework of collaboration and standardisation is what is needed to move the green finance industry into a more sophisticated one. A great example is the cooperation between the UAE government, Brookfield and Blackrock on the new climate fund – that is how you take a pragmatic approach to collaboration, we need more of that.”
His comments were echoed by Aymen Koubaa, the Regional Head of Energy and Infrastructure at Societe Generale Middle East, who said creating better regulatory standards for financiers would be crucial in allowing developing economies to capture more investments and catch up to developed ones. He also said that the more straightforward regulations would have a similar impact on the adoption of new technologies.
“When it comes to liquidity, I think it’s fair to say it is available. The reality check arrives when you realise that commercial banks that green finance today mostly invest in renewable projects that use well-known technologies in well-known markets”, he said.
“If you want to move beyond to new technologies and new markets, including those in less developed countries, there is all sorts of new challenges, including with jurisdictions and technical risks.”
“What happens is commercial banks will need to utilise a lot of assets to just make the transactions. We need to think about globally changing the rule, giving them the tools and the means to make those investments.”
