According to the International Energy Agency, wind and solar capacity additions must triple by 2030 to reach global net zero emissions by 2050. Moreover, other sectors like transport, need to make changes to increase their green investment.
Encouragingly, infrastructure investors are responding. Green private investment in infrastructure projects has grown significantly since 2010 and reached 56% of total private investment in infrastructure projects in 2020, more than doubling from just 25% in 2010. In particular, investors are showing a strong appetite for renewables, with the sector attracting 47% of total private investment in infrastructure projects in 2020.
However, green investment in infrastructure outside of renewables is limited. From 2010 - 2020, renewables represented 86% of total green private investments in infrastructure projects, while green investment in other sectors such as transport, represented only 14%.
Looking at trends by income level, green private investment in infrastructure in high-income countries has increased over the past decade to 61% in 2020, up from 32% in 2010. The renewable energy sector attracted on average 86% of this green private investment over the decade to 2020. After renewables, transport attracted only 10% of these green investments from 2010 to 2020. Due to pandemic related lockdowns, transport represented just 6% of total private investment in high-income countries in 2020. Between 2010 and 2020, other green energy investments, excluding renewable energy generation, attracted on average 3% of private investments, mainly into energy storage, transmission, and distribution. Other sectors, such as water and waste, attracted just 1% of private green investment during 2010 to 2020.
On the other hand, green private investment in infrastructure in middle- and low-income countries is significantly lower than in high-income countries. However, it has gradually increased over the past decade to 36% in 2020, more than doubling from 15% in 2010. Like high-income countries, renewable energy investments are the most preferred sector and accounted for 83% of green investments from 2010 to 2020, while green transport private investments are higher in these countries and accounted for 16% of green private investments during the same period. Unlike high-income countries, green private investment in sectors outside of renewables and transport is virtually non-existent.
These numbers show there is a long road ahead for increasing green private investment in infrastructure beyond renewables to reach net zero targets.
The opportunity for green private investment in infrastructure beyond renewables is substantial. Post-COVID-19 green recovery stimulus plans, like the United States Bipartisan Infrastructure Law and the European Green Deal, have a heavy focus on sustainability. The 43% growth in the electric vehicle market in 2020 alone, has generated a demand for green investments beyond renewable energy generation.
Whilst the focus on renewables is encouraging, its current levels are not sufficient to reach net zero targets. Attracting private investments into green beyond renewables requires facing challenges including socio-political risk, unproven technologies, supply-chain interruptions, and lack of projects.
Source: Global Infrastructure Hub based on IJGlobal data.