The paper identifies regulatory and financial policy barriers to increased participation of institutional investors in clean energy projects and recommends, inter alia, increased policy coherence, carbon pricing and the development of innovative financial instruments.
September 2012: A working paper by the Organisation for Economic Co-operation and Development (OECD), titled “The Role of Institutional Investors in Financing Clean Energy,” assesses the potential role of institutional investors in providing financing for clean energy investments and identifies current barriers in this respect.
The paper argues that institutional investors can provide much-needed financial resources for clean energy investments due to the low availability of public funds and tighter banking sector provisions of long-term finance. This funding is particularly welcome, the paper argues, considering that existing investment levels need to be doubled to around US$2 trillion a year in order to decarbonize the world’s energy system, move towards a resource efficient economy and provide energy access for all.
The paper finds that current allocations by institutional investors to clean energy projects is rather limited and identifies several barriers in this respect, including: regulatory barriers; lack of investor understanding; lack of suitable investment vehicles; lack of carbon pricing; harmful fossil fuel subsidies; and unpredictable and fragmented policy support. On this basis, the paper concludes with recommendations for a coherent green investment policy framework, such as: strategic goal setting and policy alignment; financial and regulatory reforms; and the promotion of green business and consumer behavior. [Publication: The Role of Institutional Investors in Financing Clean Energy]