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Battery electric vehicles can be up to five times more efficient than diesel vehicles, making decarbonizing transport economically sensible, especially in closed systems with high asset utilization. Examples include airports where ground vehicles operate predictably. Investing in these closed systems can be economically rational due to predictable asset utilization and higher efficiency, making the transition viable without relying on subsidies.

Investment in decarbonizing transport should focus on economic viability without subsidies to be resilient to policy changes. This approach can help ensure that solutions remain financially attractive even if government support fluctuates. The backlash against climate policies does not necessarily deter the economic benefits derived from cost-reducing solutions, making the investment case potentially strong regardless of regulatory changes.

The current fundraising environment is challenging due to the lack of immediate cashflows from existing commitments. However, strategies focusing on cash-on-cash yields, rather than back-ended capital gains, may be more attractive to investors. Infrastructure investments with annualized returns through cashflows can appeal to LPs seeking consistent yields.

Investing in transport solutions involves different technology risks compared to traditional infrastructure due to the shorter lifespan of transport assets. Investors can potentially mitigate this by taking advantage of technological advancements through regular fleet upgrades, helping ensure that up to date technology is in use. This ongoing renewal process may support the economic viability of transport decarbonization projects.

The decarbonization of transport is expected to progress significantly over the next decade as more investors recognize the potential economic benefits of reducing emissions. The transport sector, valued at an USD 8 trillion market¹, presents opportunities for emission reductions, particularly in countries with low-carbon electricity grids. The focus may shift towards economically sensible solutions rather than idealistic but potentially impractical technologies like green hydrogen.

¹ Source: ÃÛ¶¹ÊÓƵ Eco-Transport calculations from Goldman Sachs report: Green capex, making infrastructure happen, October 2022