Global environmental protection investment and financing will decrease by 30% in 2024

The global environmental protection investment and financing will be about 470 billion US dollars in 2024, which is about 30% less than the peak in 2021. Inflation such as rising interest rates and rising component prices has become a heavy burden. Under the influence of the anti-ESG (environmental, social, and corporate governance) policies of the Trump administration in the United States, there has been a trend of stopping investment, avoiding the “green” label, and turning to ordinary investment and financing.

According to data from Bloomberg New Energy Finance (BNEF), the composition of “green loans” that limit their use to environmental businesses and “sustainability-linked loans (SLLs)” that give interest rates based on the degree of greenhouse gas emission reduction will reach 470.5 billion US dollars worldwide in 2024, a decrease of 27% from the peak in 2021.

From the perspective of environmental protection investment and financing, against the backdrop of rising interest rates and inflation, it declined in 2022, and showed signs of temporary recovery in 2024. However, with the coming to power of the Trump administration, renewable energy-related investment and financing are shrouded in shadow.

“There are major doubts about whether we can continue to operate our business,” Sunnova Energy International Inc., a U.S. company involved in home photovoltaic power generation and other businesses, announced to investors in March that it was facing a crisis in maintaining its business. The announcement triggered a sell-off by investors, and Sunnova’s stock price fell by more than 60%.

Sunnova is one of the companies that benefited from the tax incentives proposed in the Inflation Reduction Act (IRA) during the Biden administration.

The Inflation Reduction Act, passed in 2022, stipulates that approximately $370 billion will be allocated to support the popularization of clean energy, etc. However, President Trump instructed to freeze subsidies and loan expenditures for climate change based on the Act, etc. Investors’ concerns about the actual effects of projects that rely on subsidies are increasing.

In addition, offshore wind power generation is also facing headwinds. The Trump administration issued a presidential order instructing the suspension of the leasing and approval procedures for public land for wind power generation. Prysmian Group, the world’s largest transmission line company in Italy, announced in January that it would abandon the cable factory project originally planned to be built in the United States for offshore wind power stations.

Globally, since 2022, environmental investment and financing has slowed down due to the increase in financing costs caused by the sharp increase in interest rates by the US and European central banks, as well as inflation such as rising material and construction costs.

The strengthening of supervision, centered on Europe, due to the increased criticism of “greenwashing”, has also become a heavy burden.

As the anti-ESG atmosphere strengthens and supervision strengthens, the trend of taking a stricter view of the decarbonization effect brought by investment and financing has intensified. People related to large Japanese banks said, “In order to avoid criticism of greenwashing in the oil industry, there is a trend of actively not labeling environmental investment and financing.”

The development costs of offshore wind power have increased sharply, and plans have been cancelled one after another. Orsted, the world’s largest offshore wind company in Denmark, has recorded an impairment loss of 12.1 billion Danish kroner for its US business from October to December 2024 against the background of rising construction costs and interest rates.

Mazniper, former CEO of Orsted, said, “We are continuing to overcome the complexity and uncertainty faced by the offshore wind power industry in the US market.”

There is also a trend of trying to maintain the momentum of environmental investment and financing. People’s Pension, a large British pension fund, has shifted its main investment destination from the United States to France, which attaches great importance to ESG.

At present, the momentum of decarbonization investment and financing in Japan has not weakened, and many opinions predict that it will continue to show a slow growth trend. However, as the international discussion on decarbonization becomes unclear, it may be inevitable that Japanese domestic companies will be affected by the anti-ESG policies of the Trump administration.