A new world of renewables
INVESTMENT ACTIONS

A new world of renewables

In the first part of this two-part paper, we assess the context, opportunities and priorities in emerging markets for renewable power investments.

Context, opportunities and priorities in emerging markets

In confronting the challenges to mitigate global climate change, there is a fundamental mismatch persisting today, between where that investment needs to occur – in emerging, high growth markets with lower renewable energy penetration – and where the capital currently resides – in developed, low growth markets, where the energy transition is more advanced.

For private investors, there are several key questions to answer. Where do we see the leading fundamentals and most attractive opportunities in these newer renewable energy markets? How do we go about investing in these locations? How can capital structuring potentially affect our assessment of risk-adjusted returns?

Highlights include
01

Where investment is most needed

One of the largest growth opportunities in infrastructure ($5 trillion over next 15 years) as demand for power is set to double across the developing world.

02

Where there is the most impact

Positive impact in parts of the world that need it the most. A transition to a low-carbon economy supports economic growth and reduces impact of climate change.

03

Taking renewables to the new world

Unique blended-finance structure provides a risk buffer to the idiosyncratic risks associated with emerging markets, helping to ‘crowd-in’ institutional capital.

Where investment is most needed

There is a fundamental mismatch in the global energy transition today, as the world addresses climate change by shifting from fossil fuels to renewables, as part of a broadening commitment to net zero carbon emissions by 2050. We see most of the world’s population growth, economic activity and carbon emissions outside of the world’s wealthiest economies. Renewable energy investments are lagging in these markets, partly due to insufficient private capital.

Economic costs of climate change are concentrated in emerging markets

Economic costs of climate change

Source: Economist Intelligence Unit. Figures represent average real GDP loss by 2050. Data as at 30 November 2019.There is no guarantee that any forecasts and forward-looking expectations made will come to pass.

Where there is most impact

These developing regions are facing firming economic growth and surging power demand. At the same time, these same regions are bearing a heavy burden from climate change, with rising sea levels, climate variability and intensifying drought and heat stress. Renewables investments can bring positive change to these markets, by providing cleaner energy, better job opportunities, sustainable communities, whilst addressing global climate change, but we need to start now.

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Net zero demands a transformation of the entire economy... one that is just, equitable, and protects people’s livelihoods – will require both technological innovation and planning over decades. It can only be accomplished with leadership, coordination, and support at every level of government, working in partnership with the private sector to maximize prosperity.

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Larry Fink’s 2021 Letter to CEOs

Taking renewables to the new world

In our view, there are compelling opportunities, across Asia, Latin America and Africa, reflecting the strong growth outlook for energy demand, supportive policy and regulatory frameworks and better risk-mitigation strategies for private investors. The right public-private partnership may be the key to unlock these renewable energy markets, by delivering both development finance capital (with its greater equity risk appetite) and private capital (with its traditional focus on risk-adjusted returns).

Download the full “A New World for Renewables” report
Download our in-depth insights as we assess the context, opportunities and priorities in emerging markets for renewable power investments
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Rael McNally
Lead Portfolio Manager for Climate Finance Partnership
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Freek Spoorenberg
Head of Product Strategy & Investor Relations
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Bruce Wan
Head of APAC Research, Real Assets
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Crystal Low
Member of BlackRock Alternative Investors, APAC
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