TODAY’S NEWS. TOMORROW’S INSIGHTS.A daily newsletter from McKinsey & Company
Edited by Belinda Yu Editor, Atlanta
Rising borrowing costs. For more than a decade, the costs of borrowing in many countries have remained very low. From 2009 to 2021, a time of rock-bottom interest rates, investors funneled more than $3.6 trillion into clean-energy assets. But now, lending rates around the world are surging as central banks battle high inflation. That may make financing the world’s clean-energy shift more challenging. Even so, lenders can take steps to keep borrowing costs down. Extending loan terms to a longer period of time can reduce fixed payments. [Bloomberg]
A gap in funding. In some economies, the clean-energy-investment gap is especially big. Africa, for example, represents nearly 40% of the world’s potential for renewable energy. In the past ten years, however, it has only collected 2% of global clean-energy investments. This is in part because long-term investments in certain countries are seen as highly risky. A better understanding of risks related to geographies, climate projects, and technologies could make it easier for stakeholders to collaborate and for officials to develop policies. [WEF]
A new phase. Over several panels held around the 2022 UN Climate Change Conference (COP27), McKinsey experts and special guests explored opportunities and challenges around financing the net-zero transition. The world has entered into a new phase of climate finance, said McKinsey senior partner Dan Stephens. Climate finance during the past decade has been focused on renewable power, setting standards, and getting commitments from the private and public sectors. This new phase of climate finance will need to accomplish new goals, including advancing climate tech.
Trillions to transition. An additional $3.5 trillion of capital a year through 2050 is needed to help decarbonize hard-to-abate sectors and accelerate climate technologies. Yet investors recognize that the energy transition remains a stable long-term investment. In 2022, renewable energy attracted roughly $500 billion in investment, exceeding fossil-fuel investment for the first time ever, noted senior partner Jukka Maksimainen. See more highlights from our COP27 panels, including how government policies can help accelerate green investment.
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