Investors see renewable energy as a priority in dynamic markets
Investment from developed countries could help bridge the financing gap to support dynamic markets on their transition to net zero
As the global economic centre of gravity shifts towards dynamic markets, investors in developing countries are looking for new grounds for investment to realise returns. New research suggests they are seeing investment in renewables as an opportunity.
Private sector funding will be crucial for supporting the transition in dynamic markets – or high growth countries, such as India, Mainland China, the UAE and Brazil, that no longer qualify as ‘emerging’.
“There is a lot of private investment flowing into the US and Europe, and increasingly into the Middle East and Africa” says Steve Cranwell, CEO, US & Americas at Standard Chartered. “But dynamic markets – excluding Mainland China – account for only around 15 per cent of global investment in renewables. This underlines the need for more private sector investment to meet the opportunity in these markets.”
The World Economic Forum estimates that dynamic markets will need about $95tn of new investment to become net zero economies by 2060. Part of this investment will be in renewable energy technologies such as solar, wind and hydropower, as well as other clean technology (cleantech).
According to Cranwell, there is a need to scale these technologies at pace. “Announcements made at COP28 highlighted that renewable energy capacity must triple by 2030 if we are to meet the goals of the Paris Agreement,” he says.
Renewables appeal to investors
Investors are already realising the opportunity: 43 per cent say that renewable energy is one of the three most important sectors in their current investment strategy, according to research conducted in 2024 that surveyed 400 banks, investment managers and asset owners based in Europe and the Americas. That puts it just behind infrastructure and manufacturing. Twenty-six per cent of respondents say that renewable energy will be the single most important sector in their future investment or development strategy.
Multinational businesses are keen to position themselves, according to Anne Hiebler, Global Head of M&A at Credit Agricole CIB. “The move to renewables is a really important source of deal flow in many markets now,” she says. “It’s a trend that applies globally – our clients’ transactions are increasingly influenced by sustainability issues.”
Channelling capital to where it’s needed
This investment is going to be vital. The rapid economic growth of dynamic markets is causing huge additional demand for energy: 88 per cent of the growth in global electricity demand between 2019 and 2040 is expected to come from these markets. Deployment of clean energy systems powered by wind and solar could help meet much of this demand.
With less legacy infrastructure to update or retire, some dynamic markets – such as India and Mainland China – may have a more straightforward path to renewable energy deployment than their developed counterparts, who face transitioning from legacy energy systems to cleaner solutions. There is a clear opportunity here for the private sector to enable this ‘leapfrogging’ to renewables by channelling capital towards renewable energy investments and supporting the capacity-building necessary to embed these energy systems in market.
Elsewhere, the transition will be more complex – such as in coal and gas exporting countries like Vietnam and Indonesia. This is where innovative sustainable finance mechanisms, such as blended finance, can play a role in addressing this at a system level and enabling private finance to invest with confidence in dynamic markets.
“As a leading cross-border bank, Standard Chartered is strategically positioned to connect capital to where it’s needed,” says Cranwell. “We see scaling investment in renewables not just as the right thing to do, but also as a genuine commercial opportunity where we can support clients as they invest.”