Renewable Energy Supply and Risk in Global Banking

Financial and economic concerns are paramount for the international banking industry to continue supporting and investing in the global renewable energy supply system. The transition to renewable energy to achieve the mission of decarbonisation is capital-intensive and needs substantial bank involvement to evaluate the risk-return profiles of such projects. However, given the projects’ unpredictable cash flows, the inherent risk can expose the banking sector to significant disruptions during challenging times. Expectedly, banks are unlikely to lend until the fear of default has been eliminated. This policy brief examines the critical difficulties posed by renewable energy supply concerns that worry an increasingly interested banking industry. It also addresses the question of how the G20 might be able to reduce these risks more effectively. The brief recommends several fiscal policy instruments and principles that could encourage investment in the renewable energy sector by banks.