As per the report of European business think tank Themis Foresight and Nord/LB, Europe’s economy is lacking $215 trillion essential to accomplish 2050’s net zero target.
Even with the availability of adequate capital, Europe’s markets are halted from capital allocation and expansion due to numerous fundamental reasons, encompassing low-risk appetite for renewable energy projects from benefactors and an inefficient capital allocation model that fails to unlock and progress vital funds for renewable energy projects.
Based on the findings of the report , the critical problem faced by EU’s capital markets are capital allocation as the capital accessibility for this energy transition is adequate and ample.
Recently, European banks predominantly regulates the net zero transition in Europe. Besides, a bank-centric approach seems futile and purposeless for advancing enough capital at a faster pace.
The energy transition could be funded effectively with the assistance and support from Asset managers, banks and governments.
Disintegration of European capital markets resulted in narrowing the system’s potential to elevate and allocate adequate capital for eco-investments.
The primary beneficiaries of climate investments include EU members and EU itself and as the guarantors they hold the authority and position to utilise these grants effectively.
A major threat for net zero financing is diminishing investment risks in Europe and in emerging markets.
The report states that auxiliary fundings to converge with the Europe’s renewable goals could be unraveled through incentives and instant and far-reaching reforms, which includes tailoring an advanced capital allocation model, accomplishing the EU’s flagship Capital Markets Union (CMU) and manifolding investor foundation and de-risking environmental investing.
European markets’ inefficiency buds from its inability to mobilise it’s capital resources; the report points out.
Political decisors in the EU and Germany should prioritise productive investments, even in abroad to attain appreciable climate impact. This includes focusing on advancing innovative technologies, low carbon industries’ infrastructure and ventures that promotes economic production and significant environment benefits.
EU’s advancement in the net zero transition could be accelerated with the reallocation of capital from low to high-productivity green assets thereby amplifying the economic expansion.
This long-term approach for climate transition could be adopted as a renewable and sustainable strategy, the report highlights.
