From a banking perspective, energy efficiency is difficult to classify in terms of business opportunities because its benefits are so widely dispersed, writes Stephen Hibbert, global head of Energy & Carbon Efficiency at ING Wholesale Banking. For this reason, to close the “investment gap” in energy efficiency, “a historic level of public-private cooperation” is needed, according to Hibbert. He sees many signs that this is happening.
Back in 2013, I was approached to join a group convened by the United Nations Environment Program Finance Initiative (UNEP FI) and the European Commission’s Directorate-General for Energy: the Energy Efficiency Financial Institutions Group (EEFIG). Their remit was to identify ways to scale up energy efficiency financing so that the potential of this market can finally be unleashed. At ING we like to think we are quite forward thinking in our approach to financing the low-carbon transition, but the EEFIG experience has taught us a lot that we didn’t know.
To put some numbers on it, energy efficiency can deliver about a third of the reduction in carbon emissions needed to meet the targets set out in the Paris Agreement, and save costs at the same time. About $1.2 trillion a year needs to be invested, which is triple the current levels, according to the UN SE4All Global Tracking Framework, and most of it will need to come from the private sector. Looking at the investment gap in energy efficiency in Europe’s buildings, for example, only half of the estimated €60 – 100 billion annual investment required to achieve Europe’s 2020 energy efficiency targets in buildings is being met.