Guest post by: Tsvetelina Kuzmanova, EU Sustainable Finance Policy Lead, Cambridge Institute for Sustainability Leadership (CISL)
COP31 is shaping up to be the “electrification COP”. This Friday, the summit will focus on finance, just as new global ambition to increase electricity’s share of the energy mix to 35% by 2035 gathers momentum, and attention focuses on how the world can actually deliver and pay for this transformation.
When we talk about electrification, we tend to think of wind turbines and solar panels. Rightfully so, given how rapidly renewable electricity has expanded in recent years.
Generating clean power is only half the story, the other is about how we use it.
That means replacing fossil fuels with electricity to heat our homes, move goods and people, and power industrial processes. Electric trucks, heat pumps, industrial machinery, all require investments, often with very different financing needs.
Europe’s latest investment data offers some insights into where we are making progress and where more attention is needed.
In 2025, large European companies allocated €512 billion to green and transition investments, representing 21% of their total capital expenditure. Incredibly, more than €1 trillion in EU Taxonomy-aligned CapEx has now been reported since 2023.
The latest report by the EU Platform on Sustainable Finance shows that electrification is the North Star shining down on Europe’s clean investment landscape.
Electricity supply accounts for 46% of reported Taxonomy-aligned investment, followed by manufacturing at 25% and transport services at 18%.
But when we look more closely along the electrification value chain a significant imbalance emerges: 61% of aligned investment across the electrification value chain is concentrated in clean power deployment and networks, while just 13% goes towards electrified end-use applications.
Europe is committing substantial capital to producing and delivering clean electricity. We now need to accelerate investments in factories, vehicles and buildings that will actually use it.
Unfortunately, financing this next phase is where things get more complicated.
Europe’s sustainable finance markets are already immense. Green lending reached €1.21 trillion in 2024, while European issuers have raised more than €2.35 trillion through green bonds since 2020.
However, capital is not flowing evenly to every part of the transition.
Established renewable energy and infrastructure assets are relatively well suited to conventional debt financing, while emerging technologies, first-of-a-kind industrial projects and new business models face greater difficulties attracting capital at scale.
Recent case studies published by Corporate Leaders Group Europe, illustrate how these challenges play out in practice.
Take electric freight: RPX is developing a battery-as-a-service model that separates battery ownership from the truck chassis. This reduces the upfront costs for operators, which is one of the main barriers to electrifying heavy-duty transport.
This is where financial innovation can be just as important as technological innovation, but scaling such models requires access to growth capital and investors willing to support innovative businesses models.
In industry, the challenge is often linked to creating the market for cleaner products.
In 2025, Taxonomy-aligned CapEx for cement manufacturing increased by 127%, reflecting growing investment in a sector traditionally considered difficult to decarbonise.
Examples from Ecocem’s low-carbon cement technology show how commercially promising innovations also depend on creating sufficient market demand. After more than 30 demonstration projects, the company is now developing its first commercial-scale facility in Dunkirk.
Here the financing challenge is closely linked to commercial certainty. Performance-based standards, public procurement and long-term purchasing commitments can help turn technological progress into predictable demand and investable opportunities.
It is a similar story across industrial electrification, where companies need confidence in future electricity prices, grid access and demand for cleaner products before committing substantial capital.
For households, the challenge is often affordability. Heat pumps can replace fossil fuel heating with more efficient electric alternatives, but high upfront costs remain a barrier for many households.
Affordable loans, targeted public support and financial products linked to building renovation can help make these investments accessible.
Financing challenges vary depending on where you are in the value chain and ramping up the volume of capital alone will not solve them. Understanding the obstacles and finding the appropiate solutions is how we must approach it.
Public guarantees, blended finance and targeted risk-sharing can help mobilise private capital where technology, construction or commercialisation risks remain significant.
Deeper capital markets, including through the Savings and Investments Union, can connect Europe’s substantial savings with productive investment opportunities.
Finance alone will not deliver, so industrial policy must help create the conditions for investment. Affordable electricity, faster grid connections, predictable carbon pricing and demand-side policy measures directly influence if projects become commercially viable.
We know where attention must turn next.
COP31’s focus on electrification is an opportunity to broaden the global conversation about the energy transition. By reducing fossil fuel dependence and strengthening industrial competitiveness, it is as much an economic opportunity as it is a climate necessity.
We have made considerable progress in financing clean electricity, we need to make sure the rest of the economy can use it.
