The urgency of transitioning from fossil fuels to clean, renewable energy sources has never been more pressing. With the global climate crisis at the forefront of many discussions, governments, businesses, and individuals are recognizing the need to shift toward sustainable energy solutions. However, decarbonization solutions including large-scale renewable development, end use electrification, green hydrogen for hard-to-abate sectors and energy efficiency improvement requires significant investment as they are highly capital-intensive and risk element is high. To achieve net-zero greenhouse gas emissions by 2050, annual global investment from USD 5 trillion to USD 7 trillion is required in the energy sector which is currently less than USD 2 trillion. Therefore, innovative financing solutions are required to make renewable energy more accessible and attractive for a wide range of investors and developers. Key solutions which are driving the growth of renewable energy are:
Green Bonds – Green bonds are specifically issued to raise capital for projects that have environmental benefits, including renewable energy installations, energy efficiency improvements, and sustainable infrastructure. The benefits of green bonds are twofold: Provide required funding for RE projects while allowing investors to support sustainable ventures that align with their ESG goals. Issuance of green bond market amounts to USD 447 billion in 2024.
lended Finance – Blended finance is especially effective in developing countries, where access to capital for renewable energy projects is often limited due to high risks. By combining concessional finance (from public or philanthropic sources) with private capital, blended finance enables the financing of large-scale renewable energy projects that may not have been feasible otherwise. For example, IREDA proposed allocation of 4-5% of domestic pension and insurance funds assets under management to renewable energy bonds.
Crowdfunding and Community Investment – For small- and medium-scale renewable energy projects, crowdfunding platforms have become an innovative solution to raise capital. Platforms like Solar Mosaic and Lendahand allow investors to pool their resources and finance renewable energy projects while earning returns. Octopus Energy Collective is another example where you can invest between 25 GBP to 20,000 GBP in renewable energy and become a project co-owner. This will not only generate financial returns for investors but also empowers communities to have a direct stake in the development of renewable energy infrastructure.
Green Banks – Green banks are specialized financial institutions that use public funds to attract private investment in clean energy projects. Financing methods include public- private partnerships, credit enhancements, and revolving capital, to lower the cost of financing for clean energy projects. In the United States, the Green Bank of Connecticut has funded over USD 500 million in clean energy projects, while the New York Green Bank has attracted more than USD 2 billion in private investment.
Renewable Energy Investment Funds – For institutional investors looking to diversify their portfolios, renewable energy investment funds are an attractive option. These funds pool capital from multiple investors to finance large-scale renewable energy projects, such as offshore wind farms or solar energy parks. For example, Brookfield Renewable Partners and NextEra Energy Partners offer investors opportunity to invest in renewable energy projects and provide a combination of steady cash flows, long-term contracts, and potential capital appreciation, making them an attractive investment vehicle.
In addition to innovative financing mechanisms, de-risking instruments like investor friendly green energy or climate policies, offtake guarantee, development domestic capital market etc. can mitigate the risks of renewable energy projects and reduce financing cost of the projects.
Suddhasatta Kundu
Director – Power Sector Advisory
Nangia Andersen LLP
A member firm of [global.andersen.com] Andersen Global
Technical Advisor, Harit Urja 2025 Organizing Committee
