BCCT said harmful banking regulations are restricting funding desperately needed for renewable energy projects hence its belief on an Energy Research Platform is the first step to ending the current funding predicament.
This was one of the critical talking points during the just-ended panel on Energy Research at the tenth BRICS Academic Forum held in Sandton, South Africa.
Professor Ari Sitas, Chairperson of the South African BTT, said the purpose of the platform would be to provide key information for strategic planning of activities of governmental structures, local authorities and enterprises of the BRICS countries.
This suggestion, along with a list of 19 other recommendations tabled during the forum, will be presented to BRICS leaders for their consideration.
Experts agreed the primary challenge in implementing renewable energy solutions, as forum delegates pointed out, is the leveraging of finances to implement green energy solutions.
Jaya Josie, from the South African delegation, said in order to limit temperature increases to 2°C, additional investment of between $780 billion and $2,3 trillion will be required by 2035.
The solution to this challenge lies with private capital, argued Aparajit Pandey from the Indian delegation.
He pointed out that currently there are $100 trillion of assets under management, available across the world.
With institutional investors seeing returns between 0,15 percent and 3,45 percent, returns have stagnated over the past decade.
“What’s more pension funds are facing a potential shortfall of $28 trillion,” Pandey said.
His sentiments come amid concern banking regulations restricted energy projects.
Banks, Pandey pointed out, are subject to international regulations such as the Basel Norms which affect how they lend money. Basel III specifically actually makes lending for projects like renewable energy more difficult.
The reason for this, he said, is that certain projects – including those in certain geographies, those that are long-term in nature and those that use special purpose vehicles– are considered by the Basel laws to be more risky.
Pandey believes to circumvent these challenges, there is need to incorporate climate risk into the equation, thereby disincentivising banks to invest in projects that aren’t green.
Another option, he said, would be to formulate an alternative credit rating system.
Josie projected green bonds, which are tax-exempt and used to fund green projects, to play a key role in helping to fund climate projects.
“BRICS countries have already had considerable involvement in the green bond market,” he said.
He noted in 2017, China’s total of green bond issuances was $37,1 billion, while Brazilian and Indian-labelled green bonds accounted for $3,67 billion and $3,2 billion respectively.
– CAJ News