By Labanya Prakash Jena and Gireesh Shrimali
DAVOS, SWITZERLAND - The adoption of renewable energy (RE) technology in developing countries is significantly less than desired. We need to invest $1.7 trillion every year in developing countries — in 2022, we hit $544 billion. To close that $1.2 trillion gap, de-risking private capital is key.
This deficit is one of the key constraints stifling the adoption of the RE sector in developing countries. There are several risks preventing capital flows to the RE sector in developing countries. Among them, credit risk is key.
In the last two decades, international institutions and financial intermediaries innovated and deployed credit risk-mitigation instruments. However, these instruments are not currently being used to their maximum potential. The high cost of these instruments, cumbersome process, inflexibility, lack of awareness and slow decision-making by multilateral institutions and governments is limiting the use of existing credit risk-mitigating instruments — and slowing the energy transition.