Financing the energy transition has been described as a problem of dual challenges for global capital markets. On the one hand, tens of trillions of dollars of investment is needed to provide energy for the billions of people that today live in energy poverty. On the other, the world’s energy system needs to be radically overhauled. It is not enough to merely slow down the rate of growth in carbon emissions – absolute emissions need to start to fall, and head towards net zero as soon as possible. Both of these challenges are going to require huge investment. Global capital markets – and therefore institutional investors – are going to play a crucial part. The starting point must be to recognise that these two challenges are not equal. We worry that some players may be hiding behind the dual nature of the energy challenge as an excuse to continue allocating capital in exactly the same way they always have. In our view, investors must treat decarbonisation as the primary challenge, while recognising we must not imperil the need to meet the world’s growing demand for energy. There are two reasons for this. Foremost is the stark reality that feeding the world’s demand for energy will be a purposeless exercise if the result is a world that is sub-habitable. The second reason is that we must recognise we have been much more successful in meeting one challenge than the other.
FT 11th April 2019 read more »