Tripling down on renewable energy efforts: what will it take?

⚡️☀️ Last October, the International Energy Agency (IEA) warned that the world’s renewable energy capacity must be multiplied by three by 2030 if we are to maintain global warming below the crucial 2°C threshold. Message received: last month, in Dubai, COP28 participants pledged to reach this target. One question remains: how do we get there?

• Renewable energies have the wind in their sails: bolstered by more capital and political support than ever before, investments in renewables reached a record $600 billion worldwide last year, says the IEA. But tripling current investment levels will be no walk in the park. Workforce shortages, supply chain disruptions, local resistance to new projects, increasing financing costs… The path to making renewable investment more appealing is strewn with obstacles. Here is our take on current hurdles and on how to overcome them.
• The renewable family has many members, from the prominent solar and wind to the lesser-known biomass, tidal energy, rain, and waves. Leaning on them to produce electricity and heat is considered by the IEA one of the main ways to keep the global temperature rise below 1.5°C. But of all renewables, solar energy is the only one making sufficient progress to stay on track with the agency’s net zero emissions scenario.

• Wind, for instance, is struggling to take off, even as it stands out for its efficiency and large-scale production capabilities. Indeed, “the development of wind energy, particularly offshore wind, is lagging behind”, writes Séverine Mateo, Global Head of the Low-Carbon Transition Group at BNP Paribas, in the latest issue of Perspectives. The sector is grappling with heightened costs and increased financing challenges, leading to project delays or cancellations and putting financial strains on developers and manufacturers.
• Among contributing factors, in many countries, is poor auction design, affecting the revenues of wind farm developers and turbine makers. Auction designs should have “sufficient flexibility to accommodate fluctuating macroeconomic conditions and costs”, the IEA points out. Another sizable hurdle is grid interconnectivity. According to another recent IEA study, 3,000 GW of renewable power projects are currently waiting to be connected to the grid. Finally, supply chains should be strengthened so they can handle the volumes targeted in large-scale investments (ships, cables, and turbines), says Romain Talagrand, Global Head of Renewables Financing, Low-Carbon Transition Group at BNP Paribas CIB. Addressing these issues will prove key to removing barriers to wind energy investment.
• In its World Energy Outlook 2023, which inspired the Dubai pledge, the IEA highlights the need to promote large-scale renewable energy financing mechanisms in emerging countries. According to the agency’s scenarios, these economies could contribute between two thirds and 80% of global electricity demand growth in the future, making accelerating new clean energy projects in those regions a top priority. Increased international support will be critical to overcome obstacles like high capital costs and complex business environments, writes the agency, which also highlights the pivotal role of international cooperation in the area.
• Indeed, financial institutions have a critical role to play in promoting the rise of renewables. BNP Paribas massively invests in renewable energies while gradually exiting nonconventional hydrocarbons and has accelerated this strategy in 2023 with new commitments. “At the end of 2022, the financing of low-carbon energies represented almost 60% of the bank’s financing of energy production”, writes antoine sire, Global Head of Company Engagement at BNP Paribas.
• But financing is not the only way banks can contribute to the renewable wave. Financial institutions can also support SMEs in their transition. “The first step is to raise their awareness and offer them accessible advice on simple measures they can take”, such as installing solar panels or heat pumps, notes Arnaud Algrin, Head of Low-Carbon Transition for Midcaps & SME Initiative at BNP Paribas. Banks can also help SMEs access specific funds and state aid. Combining diverse green finance options and advice will prove key in helping SMEs bear the costs of transition. Finally, banks can assist companies in evaluating their ESG impact – a prerequisite for accessing green finance and stakeholder reporting.

🧬 Biodiversity loss could soon jeopardise 50% of the global economy. Gathering precise, relevant data on biodiversity has never been so critical.

• Did you know that animals leave DNA fragments in soil or water long after they’re gone? This precious data is called environmental DNA, or eDNA, and collecting it can help create extensive data sets about the species present in a given location. Recently, BNP Paribas partner NatureMetrics successfully used eDNA to demonstrate that offshore wind farms can become homes for new species.
• Making quick progress in biodiversity data requires embracing open-source technologies. Beyond supporting NatureMetrics through its Solar Impulse Venture Fund, BNP Paribas has also joined forces with OS-Climate, a pool of 20+ leading organisations, to address climate risks and identify geospatial data tools that companies and investors can use.

🚀 New year, new strides towards the green transition!

• BNP Paribas is proud to launch the Climate Infrastructure Debt Fund, a new fund designed to finance promising projects in climate change mitigation areas.
• Targeting €500-750 million from institutional investors, the fund draws on the complementary expertise of BNP Paribas Asset Management, BNP Paribas CIB, and BNP Paribas Cardif.
• Among its first investments, a low-carbon energy producer, a green-sourced district heating platform, and a portfolio of onshore wind farms. Find out more here!

🦋 Leiden-based Naturalis Biodiversity Center is not just an award-winning museum on biodiversity; it is also a hotbed of research on all things life on Earth!

• In December, BNP Paribas launched a multi-year partnership in the Netherlands with Naturalis, home to more than 150 scientists driving groundbreaking research in biodiversity.
• Our goal? To boost biodiversity protection and restoration, drawing on our joint expertise to deliver impact in education and awareness, research and data, financial innovation, and science-based metrics for decision-making in finance and business. Curious? Find out more! ⤵️

🎧 Looking to better understand the Corporate Sustainability Reporting Directive (CSRD) but don’t know where to start?

• Vanessa Bouquillion, Chief Sustainability Officer of BNP Paribas Wealth Management, recommends this podcast episode from Le Sens & l’Action. In it, Sébastien Mandron, CSR director of the Worldline group, shares practical insights on how companies can navigate and leverage their transformative capacities in response to this new directive ⤵️