The multiple roles of state investment banks in low-carbon energy finance: An analysis of Australia, the UK and Germany

TLDR

Low‑carbon energy technologies are essential for climate mitigation, yet a financing gap threatens rapid deployment, and state investment banks can help close this gap by leveraging private finance. The study investigates the activities and financial instruments of SIBs and compares them to low‑carbon developers’ financing needs. Using 52 interviews, the paper presents empirical evidence on how the Clean Energy Finance Corporation, KfW, and Green Investment Bank address financing barriers for low‑carbon projects. Findings show that, beyond capital provision and de‑risking, SIBs catalyse private investment by fostering financial sector learning, building project trust, and acting as first‑mover to establish track records.

Abstract

Low-carbon energy technologies (renewable energy and energy efficiency) are considered essential to achieve climate change mitigation goals, so a rapid deployment is needed. However there is a significant financing gap and many policymakers are concerned that investment for the large-scale deployment of low-carbon technologies will not materialise quickly enough. State investment banks (SIBs) can play a key role in closing this finance gap and leverage additional private finance. Based on 52 interviews, this paper presents empirical evidence on the role of three SIBs in addressing the barriers to financing low-carbon energy projects; the Clean Energy Finance Corporation (CEFC) in Australia, the Kreditanstalt fuer Wiederaufbau (KfW) in Germany and the Green Investment Bank (GIB) in the UK. We investigate the activities and financial instruments offered by SIBs and compare these to the need for such from low-carbon developers when sourcing finance. Findings show that aside from capital provision and de-risking, SIBs take a much broader role in catalysing private investments into low-carbon investments, including enabling financial sector learning, creating trust for projects and taking a first or early mover role to help projects gain a track record.