Finding the Funds for a Green Transition: High Cost, But Hope Remains

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With global events such as the Paris Agreement and the acknowledgement of the necessity of a net-zero emission future by 2050, it has become imperative to recognize the steep financial cost of transitioning to a low carbon economy. Recent estimates suggest this transition will require huge investments of up to 4 trillion a year. Jonathan Dooley, head of the Macquarie Group’s Sustainable Investment division echos this sentiment by noting that this number “is a dizzyingly large amount of money.”

To live up to our climate commitments, investments in a variety of different sectors are needed. For instance, The International Energy Agency (IEA) states that clean energy investment will need to hit over 4 trillion dollars, with a majority of the spending focused on “transition technologies”. On the other hand, the International Renewable Energy Agency (IRA) highlights this necessity as well by noting an investment of 44 trillion by 2030 is need if we are to meet the Paris Agreement. Similarly, Dooley emphasizes the amount of money going into transition projects and mentions electric vehicles’ role.

To achieve an effective transition, Dooley believes that the investments needed will come from both the public and private sector. He believes investor appetite to be part of this transition is enormous despite the scale of the task at hand. Numerous studies have even predicted a return up to 160% if oil prices play their part.

The Macquarie Group is one of the world’s leading financial institutions, providing asset management and financial advice among other services. The company is headquartered in Australia and its services extend to 25 countries. The group is well versed in green finance and has focuses on investments in renewable energy, sustainable water, and other transition-focused projects.

As Head of the Macquarie Group’s Sustainable Investment division, Jonathan Dooley is an authority on the renewable energy sector with extensive experience in the industry. He is well known for his optimistic outlook on the energy transition and believes the public and private sector are ready to finance an ambitious green agenda.

All in all, the transition to a low carbon economy is a mammoth task, requiring large investments or ‘big projects’ and all signs point to an ‘enormous’ investor appetite in this sector. Companies like Macquarie offer investors diverse opportunities in a variety of green sectors and other firms are sure to follow too. With 4 trillion dollar annual investments needed to make a 1.5 degrees Celsius future a reality, the challenge is a big one, but the energy transition is in full swing.