Energy transition risk & cost of capital
Overview
Beginning with the energy sector, the Energy Transition Risk and Cost of Capital Project (ETRC) is exploring how to rebalance the cost of capital in favour of clean rather than polluting assets.
The cost of capital is a critical transmission mechanism between the financial and real economies as it drives capital allocation. To shift capital flows across the global economy as part of the net-zero carbon transition, the cost of capital for dirty assets needs to increase substantially and it needs to fall for clean.
The change in the cost of capital
- How is the cost of capital changing for clean assets relative to dirty for different technologies and sectors across different jurisdictions?
- What is driving these changes and is it changing fast enough?
- What is impeding or enabling the pricing of climate-related risks and stranded assets in the cost of capital?
- How could the changing cost impact companies and providers of finance and investment through changing economic and financial returns, for example?
Our research will identify transformational interventions and understand whether existing interventions, such as policies and regulations, have successfully created risks for polluting activities, and so affecting their access to capital.
