The Institute for Energy Economics and Financial Analysis (IEEFA) has called on representatives at the 29th Conference of Parties (COP29) in Baku to create policies that encourage banks to direct more funding toward renewable energy.
In a briefing note, IEEFA highlights the urgent need for institutional support and regulations that motivate banks to prioritize clean energy lending over fossil fuels.
This shift, the document suggests, is crucial to bridge the estimated $400 billion annual funding gap from 2024 to 2030, as forecast by the International Energy Agency (IEA).
Global investment in renewables has surged, rising from between $329 billion and $424 billion in 2019 to as much as $735 billion in 2023—a 73%-78% increase. Yet, meeting the target of tripling renewable capacity by 2030 will require annual investments of $1 trillion to $1.5 trillion.
“With only six years remaining, the 2030 goal for renewable energy seems a stretch too far, but enhanced cooperation between developed and developing countries and conducive local policies may bridge the gap,” commented Vibhuti Garg, IEEFA's director for South Asia.
She urged COP29 participants to reach a consensus on expanding climate finance, especially to support clean energy transitions in developing and least-developed nations.
The briefing note outlines actionable steps for financial institutions to facilitate the shift, including prioritizing renewable projects, creating green taxonomies, and enforcing financed emissions disclosures.
“By reorienting more capital to the renewable energy sector, banks can bridge the projected investment gap,” said Shafiqul Alam, IEEFA's lead analyst for Bangladesh Energy.
Additionally, Labanya Prakash Jena, IEEFA consultant on sustainable finance, suggested that governments could reduce credit risks through partial credit guarantees, enabling local banks to accelerate funding for clean energy.
Together with multilateral financial institutions, local governments can provide risk-reducing instruments, helping to stimulate capital flow toward renewables as central banks use influence to encourage clean energy investment over thermal power.
