Financing the energy transition - Thought Leadership

Energy security and climate change are driving an unparalleled economic shift in the energy sector worldwide, and reshaping the investment landscape for green energy credit.

In the first half of 2023, we have seen Silicon Valley Bank, First Republic Bank and Signature Bank in the U.S. along with Credit Suisse in Europe failing, and swift action from regulators to prevent potential global contagion. What impact will the banking crisis have on green energy credit?

In short, the banking crisis will present opportunities for credit investors. It is becoming more expensive for certain banks to keep long-term project financing on their books, and others might decrease their overall allocation to new lending, creating opportunities for alternative sources of lending, as it did following the global financial crisis.

Opportunities can be found through direct lending to green energy projects, whether through junior or senior loans, or purchasing loans directly from lenders to relieve some of the stress on the balance sheets, or other methods that alleviate charges to banks and other lenders. These tools have been used for decades in many sectors, but only few fund managers have applied them to the green infrastructure sector.

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