The solar economy

Global new investments in renewable power reached an estimated USD 366 billion in 2021, a record high despite impacts from the pandemic. The annual increase of over 6% was largely due to the global rise of solar PV installations. Solar PV and wind continue to dominate new investment in renewables, with solar accounting for over 50% of the 2021 annual total (with wind for 40%). With the COVID-19 pandemic and the surrounding economic uncertainties, major banks seem to be cautious about lending more, leading to higher rates on loans and funneling funds only to developers and businesses with better track record and successful project completion.

It is a defining indicator that in the past few years, investments in new renewable power capacity accounted for almost 70% of all investments committed to new power generation capacity, which includes fossil fuels and nuclear power. Institutions have adopted fossil fuel divestment, in which a binding commitment is made to exclude any fossil fuel company from either all or part of its managed asset portfolio. Investors have indeed turned towards sustainable finances, due to consideration of regulatory requirements, risk management imperatives, and changes in demand and asset allocation. Environmental, Social and Governance (ESG) have also become a crucial pillar for business sustainability, yet there is no global consensus to define methodologies to track and quantify the environmental impact of businesses. But as witnessed by the prominence of green bonds, climate finance has become a medium for the global energy transition.