16 May The critical role of finance leaders in accelerating a clean energy future
The International Energy Agency (IEA) recently stated that the energy world is on the brink of a new industrial era, a time predominantly focused on clean energy technology manufacturing. Harnessing this opportunity, while continuing to strengthen energy security and meeting our rising energy requirements efficiently and affordably is one of the most significant challenges we face today
A series of new laws introduced since 2021, including the Bipartisan Infrastructure Law, the Inflation Reduction Act (IRA), and the CHIPS and Science Act – have accelerated America to the forefront of this new era. Other nations worldwide actively explore similar measures to capitalise on clean energy investment.
Expanding on the previous policies that accelerated the early stages of low carbon innovation has given the US the momentum to focus on enhancing domestic manufacturing, strengthening supply chains, delivering good jobs, reducing energy costs and continuing to make advancements on the climate challenge.
The private sector, including global finance leaders, has a critical role. JPMorgan Chase, for example, has financed more than $170 billion in green measures over the last two years are intended to finance an additional $800 billion for green projects by 2030. At the same time, finance leaders provide vital financing to other industries and continue to enhance the investment and commercial banking teams to support carbon transition plans for their clients. Clean energy investment reached a record $1.1 trillion in 2022, the first time investment in the energy transition matched global investment in fossil fuels.
The challenge ahead is deploying sufficient capital at a rate to support the economy in a clean future, ensuring people don’t have to decide between affordable, secure energy over environmental action. The IRA provides business opportunities in two ways: how to produce and consume energy.
From a production perspective, capital must develop and deploy clean energy solutions and reduce the carbon intensity of conventional energy production. These processes are vital because while countries have depended on fossil fuels for many years, including aviation and heavy industries, reducing the associated emissions can slow down the rate of climate impacts while the transition progresses.
How we use energy is another vital part of the climate challenge and a capital-heavy area to restructure the economy. Financing, for example, will be needed to increase business opportunities that enable electric vehicle adoption, from battery manufacturing and assembly to installing new charging infrastructure.
The IRA will also support carbon capture and storage technology and climate solutions progressing with the support of innovative businesses, securing over $1 billion in private equity capital in 2022, doubling the total raised over the last five years within the entire carbon capture venture capital scene. CCUS will play a critical role in tackling climate change and ensuring vital industries continue to progress while responsibly meeting the needs of society. New developments, combined with more hydrogen and sustainable fuels for domestic energy efficiency, will only advance by implementing bold and structured policies. Developing a low-carbon economy on a large scale depends on successfully permitting and developing multiple projects, from installing long-distance transmission lines to manufacturing facilities and offshore renewables installation. It’s critical to adjust the existing permitting system, facilitating the rate and security required to support business investment while continuing to engage communities and protect our environment.
Furthermore, the IRA delivers secure supply chains, including additional support for domestic resources and improving collaboration with other markets and trade partners. In this new era, finance leaders must expand their focus on the energy transition because it’s the right thing to do for clients, customers, communities and investors. The US has the potential to seize the opportunity to deliver economic growth through innovation while creating new jobs and market developments through the accelerated energy transition.
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