Global investors are starting to rake in profits from financing planet-friendly projects as part of a trend that demonstrates a strong return on investment in the sector.
In fact, for the second consecutive year, CleanTechnica reported that banks made more money by financing “green projects” — including earning from bond and loan fees — than from dirty energy transactions.
The world’s largest lenders racked up $3 billion in fees last year from deals billed as being good for the planet. Comparatively, financing the dirty energy sector generated $2.7 billion, per CleanTechnica, referencing a Bloomberg report.
Revenues for companies in the category are forecast to surpass $5 trillion by next year, per an FTSE report. It cited government policies, including the U.S. Inflation Reduction Act, as part of the reason for the solid performance.
The path forward, however, isn’t without potential pitfalls.
And despite the record investments, some analysts said it’s not enough to prevent global average temperatures from exceeding preindustrial times (1850-1900) by 2.7 degrees Fahrenheit. That’s a threshold climate experts expect to result in severe environmental consequences if surpassed. BloombergNEF research suggests that by 2030 there needs to be a 4-to-1 low-carbon-to-dirty-fuel investment ratio to keep us below the mark.
“Banks still aren’t keeping pace with the rate of transition that’s required to avoid catastrophic climate change,” Jason Schwartz, a communications strategist with nonprofit The Sunrise Project, said in the CleanTechnica report.
Experts also said that more regulations are needed to ensure the investments are paying off in practice as planned. This would help prevent so-called greenwashing, when companies tout planet-friendly policies but fail to fulfill the billing. It’s something even consumers can help to regulate, by holding companies accountable to their clean pledges.
CleanTechnica’s takeaway on the topic seems to be a fair conclusion. The bankers are likely operating with profit as the guiding light, “[lending] money at the highest rate possible to people who have a better than even chance of paying it back,” per the report’s closing message.
The win for the planet is that cleaner technology is proving to be a wise investment.
“More than mandates, targets, or goals, that in itself will help the flow of capital to climate friendly ventures get larger over time,” CleanTechnica’s Steve Hanley wrote.
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