Closing the Investment Gap: Policies to Accelerate Transition Finance

The document argues that private finance is currently unable to mobilize capital at the speed and scale required for industrial decarbonization due to high costs, technology risks, and regulatory gaps. It proposes a three-pronged policy framework—generating demand, developing supply chains, and unlocking finance—to bridge this investment gap. The paper provides specific recommendations for the aviation sector, focusing on sustainable aviation fuel (SAF), and the steel sector, focusing on the cost-competitiveness of net-zero production.

• The aviation and steel sectors together represent 25% of global greenhouse gas emissions and require massive additional investment to reach net-zero: aviation needs an average of $300 billion annually between 2022 and 2050, while steel requires $200 billion for asset transition and $2 trillion for enabling infrastructure by 2050.
• Private finance is currently constrained by several factors that widen the investment gap, including the high cost of ownership for new facilities, the high risk profile of technologies low on the readiness scale, a lack of standardized 'green' definitions, and unharmonized global regulations.
• The document proposes a three-pronged policy framework to catalyze private action: generating sustained demand (e.g., reducing the 'green premium'), developing reliable and scalable supply chains (e.g., prioritizing critical inputs), and unlocking finance and other enablers (e.g., de-risking measures and national net-zero pathways).
• For the aviation sector, key policy priorities include introducing SAF blending mandates combined with pricing gap mechanisms to ensure cost-competitiveness, establishing clear sustainability criteria to reduce regulatory risk, and providing longer-tenor incentive schemes to allow financial institutions to hedge risk.
• In the steel sector, the document emphasizes the need for a clear definition of low-CO2 steel to boost buyer and financier confidence, and the use of mechanisms like the Carbon Border Adjustment Mechanism to prevent businesses paying carbon prices from being undercut by those outside the system.
• The steel industry faces a significant financial hurdle as first-of-a-kind net-zero steel plants are estimated to have operating costs up to 55% higher than conventional plants in the 2020s.

APA

World Economic Forum (2022). Closing the Investment Gap: Policies to Accelerate Transition Finance. https://www3.weforum.org/docs/WEF_Closing_the_Investment_Gap_Policies_to_Accelerate_Transition_Finance_2022.pdf

Chicago

World Economic Forum. Closing the Investment Gap: Policies to Accelerate Transition Finance. 2022. https://www3.weforum.org/docs/WEF_Closing_the_Investment_Gap_Policies_to_Accelerate_Transition_Finance_2022.pdf.

Wikipedia

{{cite report |author=World Economic Forum |title=Closing the Investment Gap: Policies to Accelerate Transition Finance |date=May 2022 |url=https://www3.weforum.org/docs/WEF_Closing_the_Investment_Gap_Policies_to_Accelerate_Transition_Finance_2022.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{worldeconomicforum2022closing, author = {{World Economic Forum}}, title = {{Closing the Investment Gap: Policies to Accelerate Transition Finance}}, institution = {World Economic Forum}, year = {2022}, month = may, url = {https://www3.weforum.org/docs/WEF_Closing_the_Investment_Gap_Policies_to_Accelerate_Transition_Finance_2022.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }