Overcoming climate financing barriers for renewable energy projects

Climate financing in Asia faces an $800 billion shortfall. How should you bridge the gap?

The International Energy Agency (IEA) estimates that achieving net zero by 2050 will require more than $4 trillion in annual clean energy investment by 2030. While global clean energy investment has increased by 83% since 2015, it remains significantly below the target set by the IEA. 

While the transition to renewable energy is critical to a sustainable future, many projects in Asia continue to face substantial financing barriers, beginning with challenges in securing approval from company boards or investment committees. In the region, markets face an estimated climate financing shortfall of at least $800 billion.

We talk to Benjamin Chang, Energy & Power Leader, Marsh Asia, and Maurits Quarles van Ufford, Credit Specialties Growth Leader, Marsh Asia on how leaders today can overcome this challenge.

Q: Why do board of directors often hesitate to approve business cases for energy transition projects? What are the main barriers to obtaining their buy-in?

Benjamin: The hesitation is a combination of scepticism about the technology and anxiety about capital efficiency in a volatile world. A significant hurdle is the long return on investment (ROI) timeline. Energy transition projects typically require substantial upfront capital, with payback periods extending over many years. This often conflicts with board priorities focused on short- to medium-term financial outcomes. Boards are grappling with the “pragmatic transition”, balancing their capital tied up in existing conventional power assets with the risk of these being “stranded assets”, against the CAPEX required for energy transition projects.

Furthermore, the “Green Premium” is harder to justify, particularly when technologies are new and require high levels of capital. All of these add to the sense of strategic risk, which can make boards reluctant to fully commit.

Q: From a financial perspective, what are the common challenges stakeholders face?

Maurits: There are two perspectives. Beyond strategic risk, lenders or financial institutions face financial uncertainty. A key issue is the creditworthiness of borrowers, particularly for new or untested renewable energy projects.

For developers and operators of large-scale energy transition projects, managing long-term sales contracts can be challenging due to potential Mark to Market risks. These risks can cause valuation volatility, affecting the financial stability and appeal of projects to investors and lenders. 

Geopolitical risk has been one of the top threats facing businesses and investors in the current new world order, based on many recent surveys conducted. According to the Marsh Political Risk Report 2025, many long-standing assumptions such as the stability and security of trade flows, particularly between the US, China, and other major trade partners, and the reliability of supply chains from specific regions, such as Southeast Asia, are increasingly in flux. 

Additionally, many clean energy technologies lack proven operational track records, which raise risks for investors. This makes renewable energy project financing less attractive and often inaccessible.

Q: Can you provide examples where renewable energy projects failed due to financing challenges or policy changes?

Benjamin: One prominent example is Mitsubishi Corporation’s withdrawal from three offshore wind projects in Japan. This is a textbook example of the “Inflationary Trap” where construction costs had more than doubled from original estimates. When your Levelised Cost of Electricity (LCOE) models break due to price increases, the company could no longer build a feasible business case, even after exploring options like supplier changes and timeline adjustments.

In another case, 26 solar power project tenders in Myanmar were cancelled after a regime change. These tenders were originally awarded under a democratic government. The reversal highlights how political risks can undermine even well-structured renewable energy investments.

Q: How can developers and operators successfully secure financing for energy transition and climate projects? 

Maurits: The IEA reported that energy demand rose twice as fast in Southeast Asia in 2024 as in the rest of the world, and the agency predicts that consumption in the region will double in less than 25 years. Further, they suggest that renewable potential is more than 50 times current generation in the region. If Asia is to meet rapidly growing demand, large-scale investment in energy transition projects will clearly be needed.

This clear demand signal, however, does not negate the financing, investment, or political challenges that Benjamin and I mentioned earlier. 

As Asian grid interconnection improves, ADB alone committed $10 billion toward this in October 2025, countries will have to continually align regulatory models and infrastructure standards, potentially resulting in changes that could affect forecast investment returns. There is also the possibility that future governments may adopt a less multilateral approach and consider nationalising transition projects to control energy delivery. All are tangible risks that investors may be able to mitigate through political risk insurance. 

Corporate Power Purchase Agreements (PPAs) are also becoming more common in the region, with agreed offtake volumes in APAC growing at double-digit rates over the first few years of the 2020s. PPAs are well recognised as an important mechanism for attracting financing and scaling investment in energy transition projects, yet they can carry significant long-term credit and non-payment risks that need to be mitigated with credit or non-payment insurance. 

Q: From an operational perspective, how can insurance unlock capital? 

Benjamin: Insurance plays a vital role in enabling transition finance by improving project viability through the transfer of risks that might otherwise deter lenders and investors. However, underwriters may exercise caution, especially in Asia, due to limited loss claims history and the heightened exposure to natural catastrophe risks.

At Marsh, our Renewable Energy team includes dedicated risk engineering specialists who provide expert advisory services on physical risk mitigation. We work closely with clients to develop tailored risk management strategies that incorporate risk engineering and natural catastrophe modelling to strengthen project resilience. These measures help reduce both the likelihood and impact of adverse events, thereby lowering the overall risk exposure and facilitating more favourable insurance outcomes. In a capital-intensive sector, even a basis-point reduction from the total cost of risk can be the difference between a project being approved or rejected. 

Learn more about physical climate risk management. 

Q: What is your outlook on the future of energy transition and climate financing in Asia?

Benjamin: Momentum is building. As technologies mature and success stories grow, boards will shift their views on risk and become more comfortable with long-term investments. There will be a flight to quality, and capital will flow to projects that transparently mitigate their risks. 

Maurits: On the financing side, we expect to see more innovation, from new risk transfer mechanisms to greater collaboration between the public and private sectors. This is especially true because, despite some uncertainty in the space, many businesses and countries are doubling down on their commitment to the energy transition, either in pursuit of energy security or to mitigate the forecast impacts of climate change. Singapore, for example, continues to develop its carbon credit market and bilateral carbon trading agreements, having reached nine such agreements by late 2025. As these trends accelerate, Marsh will continue to play a key role in helping clients unlock capital and navigate complexity.