Financing Decarbonisation

In 2015, the CCR - acting through the University of Cambridge Centre for Climate Change Mitigation Research and the Cambridge Institute for Sustainability Leadership - was a core member of a project team supporting the National Bank of Abu Dhabi (NBAD) in building the business case for investment in low carbon energy. NBAD had developed an ambition to become a major financier of low carbon projects, and sought a business rationale for doing so. The result: the Financing the Future of Energy report, produced jointly by CISL, 4CMR and PwC. The business case for such investments rests on four Pillars explored in detail in the report:

Pillar 1: The scale of the opportunity is large. The investment required for power generation, transmission and efficient use of energy is in the order of tens of billions of US dollars per year in the region – and hundreds of billions (possibly a trillion) US dollars per year worldwide. Continued rising use of energy in global economic development will ensure a locked in energy demand, which underpins the attractiveness of this area as an investment proposition.

Pillar 2: Renewable energy technologies that can realize these opportunities are proven, cost-effective and available today. They also have the benefit of balancing economic development, energy supply, sustainability and social ambitions for consumers, policymakers and investors. (Did you know that 50% of new energy generation investment in the past 5 years has been in low carbon sources?)

Pillar 3: Investors and developers see a global stage for projects. While the particular characteristics of demand and supply are local, the opportunity for proven technologies and finance packages is global. For example, government ambitions and targets have put solar and wind power at the heart of future energy developments in the Middle East. Ambitious targets and well developed programs create the opportunity for the development of significant local markets and experience. Building renewable energy technology supply chains and capacity within the region will also open up the opportunity to export expertise and deliver solutions elsewhere, especially along the West- East Corridor (from west Africa to east Asia) where the requirement to meet new demand and to find non-traditional and innovative solutions is even more pressing.

Pillar 4: Realizing the opportunity will require collaboration between policymakers and financial institutions. Governments all over the world, including in the Gulf region, are setting ambitions and shaping strategies to respond to climate change and decarbonise their economies. Because of the sheer level of investment needed to deliver on those strategies, there is a major role for the private sector, especially the finance sector, to play in enabling Governments to make those policy ambitions a reality.

There is an interesting and important side story to this report. When it was written by the research team, we wrote it in a way only academics can love! The communications firm Brunswick stepped in and guided the editing so the report was readable, had a clear and simple message, and looked attractive. Stimulating people to act requires such a professional touch to narratives, and we were fortunate to have the team at Brunswick turn a dry report into an effective instrument for change.