How to Think About the Role of Private Capital in the Clean Transition
Nov 1, 2023
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Olivia Wassenaar, Head of Sustainability and Infrastructure at Apollo, shares insights on the monumental investments required for the clean transition. She discusses the urgent need for private capital to address climate challenges and the potential of innovative technologies to drive change. The conversation explores U.S. legislative efforts aimed at stabilizing clean technology investments and the importance of sustainability in personal interests. Wassenaar also examines diverse investment strategies that can shape the future of carbon-free energy.
The clean transition necessitates a dramatic increase in investment levels, requiring private capital to address a significant funding gap alongside public contributions.
Recent U.S. legislation provides a solid foundation for private sector investment, enhancing clarity and security for attracting substantial capital towards sustainable initiatives.
Deep dives
Investment Opportunities in the Clean Transition
The clean transition presents an enormous investment opportunity, estimated to require substantial capital increases over the coming decades. Current investment levels need to triple by 2030 and quintuple by 2050, growing from $1.6 trillion today to nearly $8 trillion by mid-century. This transition encompasses more than just energy sources; it also involves water usage and the circular economy, thereby addressing the broader economic landscape. The International Energy Agency and McKinsey have projected that global investment needs could reach between $150 trillion and $275 trillion, highlighting the urgent need for both public and private capital.
Government Support and Legislative Changes
Recent U.S. legislation, including the Inflation Reduction Act and the Infrastructure Investment and Jobs Act, has mobilized significant financial support for the clean transition. This substantial backing—over $532 billion—offers greater certainty for private sector investments, as it provides a clear funding runway of approximately ten years. Enhanced visibility into future funding stands to increase private capital contributions, which are anticipated to fill a 70% funding gap that the government cannot cover. This public-private partnership represents a game-changing dynamic in addressing climate change and bolstering clean energy efforts.
Diverse Investment Themes and Strategies
The clean transition investment strategy spans various sectors, with focus areas including energy transition, sustainable mobility, sustainable resource use, and industrial decarbonization. Opportunities include investing in renewable energy, electric vehicle infrastructure, plastics recycling, and innovations for hard-to-abate industrial sectors. Talented investors can explore a broad range of assets, from equity to credit, ensuring a diverse portfolio that taps into multiple emerging technologies. Despite the historical emphasis on energy transition, growing interest in sustainable mobility and industrial decarbonization indicates a broadening spectrum of attractive investment avenues.
Listen to Apollo Chief Economist Torsten Sløk speak with Olivia Wassenaar, Head of Sustainability and Infrastructure at Apollo, about the outsized and unprecedented investment required for the clean transition. Olivia and Torsten acknowledge the scale and cost of the climate crisis while also voicing optimism about the power and potential of public and private capital in addressing these challenges.
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