Accelerating the Energy Transition 2025

The affordability of capital, especially in EMDEs, will depend on optimized risk-sharing structures that engage a diverse range of investors – corporates, governments and households – drawing on multiple financing sources, including from commercial banks, the public sector, multilateral development banks (MDBs) and development finance institutions (DFIs). Different investors will need to absorb different types of risk. For instance, more equity might be needed to finance low-emission fuels and CCS as these technologies often carry higher risks that require patient capital willing to absorb uncertainties. Meanwhile debt may be more suitable for low- emission power infrastructure such as nuclear which, despite being capital-intensive, typically offers stable and predictable cash flows over the long term once operational. In addition, achieving scale will require an integrated policy approach with system-wide planning, such as ensuring that increases in renewable energy generation are matched by investments in grids and storage systems. To attract investors, businesses must develop clear capital expenditure (CapEx) strategies to accompany transition plans, articulate expected returns and collaborate closely with key players across the investment value chain to build strong financial cases. The finance sector also plays a key role in shaping policy and guiding decisions that create favourable conditions for clean energy investments. The World Economic Forum’s Playbook of Solutions for mobilizing clean energy investment in EMDEs references replicable best practices, including successful policy measures, de-risking tools and finance mechanisms designed to strengthen the business case and increase capital for clean energy in emerging market and developing economies. Policy credibility A credible, stable and consistent policy framework is necessary for building investor confidence, reducing risk and fostering long-term commitment to the energy transition. Inconsistent policy signals from governments, frequent regulatory changes, or the absence of long-term targets create volatility and weaken the business case, making developers and investors reluctant to commit resources to new technologies and infrastructure. Short political cycles add to this challenge, as governments may struggle to provide the consistency required for a multi-decade transition. Policy effectiveness also depends on governments’ capacity to design and implement industrial policies, which varies across countries and directly shapes investor confidence. Initiatives such as the US Inflation Reduction Act (IRA) demonstrate how clear policy signals from governments shape market demand and drive private sector investment. With tax incentives and targeted funding – particularly in underserved communities – the IRA is spurring a wave of announcements and projects across legacy and clean-tech sectors, shifting the focus from risk mitigation to opportunity capture15 and making clean energy strategies a competitive and social imperative. However, as the political landscape evolves in the US, uncertainty remains about the long-term future of the IRA and its provisions. Similarly, the European Commission’s EU Taxonomy sets standards for sustainable investment by providing clear criteria for businesses and investors to identify green opportunities.16 In 2024, over 700 European companies reported €250 billion in EU Taxonomy-aligned investments, showing how structured policy frameworks can build corporate confidence and channel investment towards viable and sustainable projects. Inconsistent policy signals from governments, frequent regulatory changes, or the absence of long-term targets create volatility and weaken the business case.Around 74% of low- to medium-income countries have sovereign risk ratings of B+ or lower – levels that most private foreign investors are typically unwilling to accept.cost competitiveness, stable demand and continued policy support. However, in many emerging markets, where perceived or real risks are higher, capital costs can be more than double those in advanced economies, leading to fewer projects reaching final investment decisions (FID). Around 74% of low- to medium- income countries have sovereign risk ratings of B+ or lower14 – levels that most private foreign investors are typically unwilling to accept. Accelerating the Energy Transition: Unpacking the Business and Economic Cases 11