Energy transition investment follows familiar patterns in global capital markets. Large, established financial institutions supply hundreds of billions of dollars a year to finance construction of long-lived assets using familiar zero-carbon technologies — i.e., deployment. Smaller institutions (some well-established, others quite new) supply tens of billions to fund company formation and the proving-out of new technologies and business models, or innovation.
Q4 2021 hedge fund letters, conferences and more
Last year, energy transition and climate tech — including renewable energy, energy storage, electrified vehicles and heating, hydrogen, nuclear power, sustainable materials and carbon capture — attracted more than $900 billion. Energy transition pulled in $755 billion, a 25% increase over 2020 investment, double what was invested in 2015, and a more than 20-fold increase since 2004.
A look at this chart reveals something important. Renewable energy is no longer the investment growth driver it once was. With $366 billion invested last year, renewable energy is still a driver of investment volume (it is still almost 50% of all investment). The investment growth distinction belongs to electrified transport, which exceeded $270 billion last year.
Comparing compound growth rates shows these two trends very clearly. Electrified transport is growing at ten times the rate of renewable energy — and if that rate holds for just one more year, transport will be a bigger driver of energy transition investment than renewable power. It is worth watching energy storage’s growth rate as well, which at more than 30% means the sector investment doubles in a little over two years.
Climate innovation funding reached $165 billion in 2021. BloombergNEF tracks climate tech investment by both asset class and sector, and both reveal important trends.
Read the full article here by Nathaniel Bullard, Advisor Perspectives
