One of the primary challenges facing BRICS countries in terms of implementing renewable energy solutions, is the leveraging of finances.
This was one of the critical talking points during a recent panel on energy research at the tenth BRICS Academic Forum held in Sandton, South Africa.
According to CAJ News, in overcoming this predicament, the Brazil, Russia, India, China and South Africa (BRICS) Think Tanks Council (BTTC) has proposed for the establishment of Energy Research Platform.
Professor Ari Sitas, chairperson of the South African BTT, said the purpose of the platform would be to provide key information for strategic planning of activities of governmental structures, local authorities and enterprises of the BRICS countries.
Limiting temperature increases
Jaya Josie, from the South African delegation, said in order to limit temperature increases to 2°C, additional investment of between $780 billion and $2,3 trillion will be required by 2035.
The solution to this challenge lies with private capital, argued Aparajit Pandey from the Indian delegation.
He pointed out that currently there are $100 trillion of assets under management, available across the world.
With institutional investors seeing returns between 0,15% and 3,45%, returns have stagnated over the past decade.
“What’s more pension funds are facing a potential shortfall of $28 trillion,” Pandey said.
Incorporating climate risk
Pandey pointed out banks, are subject to international regulations such as the Basel Norms, which affect how they lend money.
Basel III specifically actually makes lending for projects like renewable energy more difficult. Read more: BRICS bank could issue up to $384m in green bonds
The reason for this, he said, is that certain projects – including those in certain geographies, those that are long-term in nature and those that use special purpose vehicles- are considered by the Basel laws to be more risky.
However, to circumvent these challenges, Pandey said there is need to incorporate climate risk into the equation, thereby disincentivising banks to invest in projects that aren’t green.
Another option, he said, would be to formulate an alternative credit rating system.
Josie projected green bonds, which are tax-exempt and used to fund green projects, to play a key role in helping to fund climate projects.
“BRICS countries have already had considerable involvement in the green bond market,” he said.