When people aren't sure where interest rates are going, they actually dump more money into renewable energy.
March 26, 2026
Original Paper
The Impact of Interest Rate Uncertainty on Renewable Energy Investment: Empirical Evidence from OECD Countries
SSRN · 6469731
The Takeaway
Standard economic theory suggests that uncertainty kills investment in capital-heavy sectors like renewables. However, in sophisticated financial markets, volatility acts as a catalyst by prompting institutional investors to strategically rebalance their portfolios toward green assets.
From the abstract
Conventional wisdom, grounded in real options theory, posits that interest rate uncertainty unequivocally deters investment, particularly in capital-intensive renewable energy. However, this view overlooks potential heterogeneity in how financially diverse economies respond to volatility. This paper challenges the presumption of a uniformly negative effect by investigating the asymmetric impact of interest rate uncertainty on renewable energy investment (REI) across 23 OECD countries (1992–2023)