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Mapping Channels to Mobilise Institutional Investment in Sustainable Energy

image of Mapping Channels to Mobilise Institutional Investment in Sustainable Energy

What are the channels for investment in sustainable energy infrastructure by institutional investors (e.g. pension funds, insurance companies and sovereign wealth funds) and what factors influence investment decisions? What key policy levers and risk mitigants can governments use to facilitate these types of investments? What emerging channels (such as green bonds, YieldCos and direct project investment) hold significant promise for scaling up institutional investment?

This report develops a framework that classifies investments according to different types of financing instruments and investment funds, and highlights the risk mitigants and transaction enablers that intermediaries (such as public green investment banks and other public financial institutions) can use to mobilise institutionally held capital. This framework can also be used to identify where investments are or are not flowing, and focus attention on how governments can support the development of potentially promising investment channels and consider policy interventionsthat can make institutional investment in sustainable energy infrastructure more likely.

 

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Towards a framework for understanding investment channels: Financing instruments and funds

This chapter proposes a framework for understanding how institutional investors, specifically large pension funds, allocate capital to sustainable energy investments in projects or “corporates”. The analysis is supported by 47 actual investment cases collected for the purpose of this report and described in detail. The chapter introduces a framework for understanding investment channels by constructing a classification system. Tabular and visual devices illustrate how the classification works for different types of transactions. “Investment pathways” illustrate decision processes, including the choice between direct or intermediated investment, in projects or corporations. “Matrix frames” visually plot transactions together and display trends. A “schematic overview” visual device is used at the level of a single transaction to highlight how instruments, funds, risk mitigants and transaction enablers have all come together in a specific investment example. The chapter concludes with how the framework can be used in the future.

English

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