By 2050, the global population is set to reach almost 10 billion people, bringing with it unprecedented energy consumption. This will be an existential challenge unless businesses can pioneer new technologies and business models that minimise emissions of greenhouse gases.

There is plenty of incentive for them to do so. Regulatory pressure means they will have to substitute polluting systems with greener ones, while clean technology and business model innovations themselves, such as batteries for electric vehicles, wind energy and circular economy systems, offer companies the best solutions to meet their sustainability goals.

But many will feel there is an inevitable risk in shifting away from business models and systems that they have relied on for decades.

Banks and businesses work together at a strategic level

Leonie Schreve, global head of Sustainable Finance at ING says that this is where banks can step in. They can provide more risk-bearing capital to clients, as well as practical advice about how to reconfigure themselves to be more sustainable.

"That is where we are currently focusing on being a partner for our clients," she says. "It becomes a strategic dialogue with our clients to help them identify investments and divestments to safeguard their resilience in tomorrow's economy."

Strategic discussions can go a long way in supporting clients to scale up promising technologies or systems. Take the use of blue or green hydrogen as a low-carbon alternative and a way to decarbonise industrial processes. Investment into projects along the entire hydrogen value chain is estimated to be $500 billion by 2030.

But clean hydrogen remains expensive, which means it is not yet competitive. Despite this, Gido van Graas, global lead New Energy Technologies at ING, says "hydrogen could, next to wind and solar, have the biggest impact on the energy transition itself" as "global CO2 emissions can be eliminated" by scaling up its use.

"The implementation of hydrogen in the coming decades will require trillions of dollars of investment not only in production facilities, but also in transportation and storage," he says. "We are very keen to support our client base in their energy transition here."

Banks are financing innovation

One way for banks to support their clients, of course, is with finance, and they are increasingly using it to support innovative green businesses. In July 2020, for instance, Swedish start-up Northvolt raised $1.6 billion in debt financing from a consortium including commercial banks to support the creation of two gigafactories — production plants that can produce lithium-ion batteries for electric vehicles.

The aim is for these gigafactories to be powered by renewable energy instead of fossil fuels. They are much needed: the market for batteries in Europe is forecasted to be worth €35 billion by 2030, which is more than twice its size in 2020.

Whether it is hydrogen or battery technologies, these sustainability innovations depend on banks and companies working together towards a greener future.