In this blog, Amandine Tetot, head of energy and project finance at Triodos Bank UK, explores how the right investment can drive the energy transition, and outlines where financing priorities should lie.
Last week, governments, civil society, businesses and activists gathered in Santa Marta, Colombia for the first-ever international conference on the transition away from fossil fuels. This marks commitments to present a new wave of fossil fuel transition roadmaps from 57 countries, marking a shift from setting ambitions to realizing the details of building clean energy systems.
This promise of practical action is desperately needed and long overdue. In many ways, the transition is already well underway: cleaner, sustainable energy technologies are proliferating and have become the cheapest sources of new electricity generation in many regions.
Yet global energy systems are still dominated by fossil fuels. Billions of people suffer the health impacts of energy-related pollution and continue to face energy poverty, volatile prices or unreliable supply. As climate impacts mount, from record heat waves to grid failures, the weaknesses of our current energy system become increasingly urgent.
The role that finance can – and must – play to accelerate the transition
In November 2024, the Independent High-Level Expert Group on Climate Finance estimated that the global energy transition will require $6.3 trillion (£4.63 trillion) per year by 2030, not only for renewable energy production, but also for the wider energy system – including enabling technologies, new business models, market designs and system operations.
We are still a long way from achieving this. Large flows of public and private financing continue to support fossil fuels, locking in emissions and slowing change.
This is partly due to continued support from public finances, with the vast majority of government investment in global energy sources going to the fossil fuel sector. In addition, fossil fuel subsidies (such as tax exemptions and price controls) continue to reduce the effective cost of energy from fossil fuels, strengthening competitiveness against renewables and slowing the reallocation of capital to clean energy.
However, public money is not the only force keeping fossil fuels afloat; Commercial financing also plays a major role. In 2024, the world’s largest banks increased their fossil financing by $162 billion – money that could instead have been used to finance the energy transitions of entire countries.
This harmful short-term approach to energy financing must end. Instead, we need the global financial system to reorient capital flows to make the energy transition predictable, affordable and socially just.
Finances are not a neutral enabler. It plays a decisive role in shaping the transition – both by actively financing solutions and by withdrawing support from activities that are incompatible with a truly net-zero and just future. This includes making informed choices about what not to finance, even if market signals remain favorable.
Interconnected actions to advance the transition
A sustainable energy future is not simply about replacing one set of assets with another, it requires reforming the way energy is produced, consumed and valued – from a system driven by extraction and growth to one built on resilience, sufficiency and long-term social benefit. It relies on four interrelated actions: clean supply, reliable supply, demand reduction, and fair and inclusive access. Together, these principles define what the energy transition must achieve, and how it can do this in a way that serves both people and the planet.
Each step focuses on a particular part of the energy system, but also strengthens the others – and all four depend on financing. Therefore, financiers and investors must channel their financing through all these pillars.
1) Clean facility
The basis of the energy transition lies in investing in a clean energy supply, with an emphasis on scaling up the generation of renewable energy. However, to be truly ‘clean’ we must ensure that any negative impacts on the environment or society are minimized.
Firstly, scaling up renewable energy sources must go hand in hand protecting biodiversitywith smarter spatial planning that integrates energy and ecology – such as the financing of agricultural voltaic energy that combines solar energy production with sustainable agriculture, or offshore wind farms that reduce pressure on land use.
Financing a clean facility must also address this problem human rights and labor standards. Banks can strive to promote high social and environmental standards by engaging with customers, supporting certification and traceability initiatives and, where possible, prioritizing technologies and suppliers that meet strict criteria – while consistently working towards greater transparency and accountability.
2) Reliability
The energy supply must be reliable, and for that we need targeted investments in innovation to build a resilient, robust energy infrastructure. We also need sufficient transmission and distribution capacity to unlock new renewable energy projects that have been stalled waiting to be connected to the electricity grid.
To effectively meet the challenge of delivering and balancing electricity supply, the financial sector must focus on network capacity, flexibility and resilience as key investment priorities. While large national networks are primarily a government responsibility, banks can play a role in this; For example, Triodos Bank focuses on local networks that often involve solar, wind and battery storage, highlighting the important role that private lenders can play in supporting interconnected regional systems.
3) Reducing demand
The energy transition is gaining momentum, but our economic system focused on profit and GDP growth remains a barrier, and energy efficiency gains are often offset by overall consumption increases.
The financial sector can play a much more structural role in reducing energy demand – not only by supporting efficiency, but also by reshaping the way energy is used. This includes working on innovative financial mechanisms that improve the uptake of energy-saving innovations, such as financing deep renovations of buildings that significantly reduce consumption, supporting business models based on sharing and circularity, enabling heating networks that reduce aggregate demand, and encouraging consumption patterns aligned with adequacy.
4) Fair and inclusive access
To truly succeed in realizing a just, sustainable future, the energy transition must be clean, reliable and accessible to everyone.
The financial sector can help embed and advance fairness across the system, from enabling new ownership models such as community energy and local cooperatives to financing solutions that improve affordability for vulnerable households, supporting decentralized energy access in underserved regions, and promoting responsible and transparent supply chains for the materials that underpin the transition.
Broader systemic change
The energy transition cannot be achieved with technology or finance alone; it requires systemic change. Real progress requires a change in the rules that govern markets and institutions.
That’s why we need more financial institutions to make firm, binding commitments to support the transition. Triodos was the first bank to join the global campaign for a Fossil Fuel Non-Proliferation Treaty, aimed at ending the expansion and accelerating the phase-out of coal, oil and gas. Together with a broad coalition of scientists, cities, indigenous groups and businesses, we have called on governments to commit to declaring a firm ‘no’ to fossil fuels once and for all.
To achieve the energy transition, we must introduce regulations that set enforceable rules, such as a legal ban on financing new fossil fuel projects and mandatory climate and nature transition plans for companies.
Through these joint efforts – from financiers, governments, policymakers and businesses – we have the capital, resources and roadmap to advance the energy transition. The question is how quickly others will join us in taking action.
