Foreign investors invest far too little money in sustainable energy in developing countries, the United Nations concludes in a new report. After the conclusion of the Paris climate agreement in 2015, investments in renewable energy sources tripled, but growth is weaker in poorer countries than in richer countries.
At the same time, the challenges in poorer countries are greater because the transition to cleaner energy also requires more investment in infrastructure such as electricity cables and networks.
According to the United Nations Conference on Trade and Development (UNCTAD), developing countries need $1.7 trillion (1700 billion) in renewable energy investments annually to limit global warming to 1.5 degrees, the main climate target of the UN—Paris Agreement. But last year, foreign investment in renewable energy for these countries stalled at $544 billion.
A major problem is the high debt burden of many poor countries. Since last year, this has put even more pressure on the financial stability of several countries because interest rates have risen sharply, and many important raw materials have become more expensive. According to UNCTAD, measures are needed to make investments in green energy in developing countries less risky. Partnerships between private investors and the government could help with this. International development banks could also do more to persuade investors to invest in energy projects in riskier countries.
UNCTAD also notes that fossil fuel subsidies make transitioning to cleaner alternatives more difficult. Worldwide, it would be $ 1 trillion, eight times as much as all subsidies for renewable energy. “While phasing them out is complex, especially for developing countries, doing so would encourage investment in renewable energy,” the report says.
In addition to access to sustainable energy, the UN organization also looked at the necessary investments to achieve other sustainable development goals. This concerns, for example, access to clean drinking water and eradicating poverty, hunger and gender inequality. In 2022, about USD 4 trillion was underinvested; in 2015, that deficit was still USD 2.5 trillion.