Source: Global Infrastructure Hub based on IJGlobal data.
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 60% of total private investment in infrastructure projects in 2021, almost tripling from just 22% in 2010. In particular, investors are showing a strong appetite for renewables, which represented 91% of total green private investments in infrastructure projects in 2021, while green investment in other sectors such as transport, represented only 9%.
Looking at trends by income level, green private investment in infrastructure in high-income countries has increased to 65% in 2021, up from 30% in 2010. The renewable energy sector attracted 89% of this green private investment between 2010 and 2021. After renewables, water and waste attracted 4%, and transport only 2% during the same period. Other green energy investments, excluding renewable energy generation, attracted 4% of green private investments, mainly into energy transmission and distribution.
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 43% in 2021, almost quadrupling from 12% in 2010. Like high-income countries, renewable energy investments are the most preferred sector and accounted for 93% of green investments from 2010 to 2021. More so than in high-income countries, green private investment in sectors outside of renewables is very limited in middle- and low-income countries.
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.