Foreign Capital And Its Role in Australia’s Renewable Future
According to John Kehoe in the AFR, proposed changes to Capital Gains Tax (CGT) are raising alarm bells among renewable energy investors. Industry stakeholders warn that altering the way foreign investment is treated could have far-reaching consequences for Australia’s decarbonisation ambitions. (1) If the cost of doing business in Australia rises significantly, global investors will look elsewhere. That outcome risks slowing the pace of renewable energy development at precisely the time when the nation needs to accelerate.
For Australia to deliver a renewable future, it must be invested in. A large share of that capital has to come from overseas, because domestic pools of capital, while growing, are not sufficient to meet the scale of the challenge. At the same time, Australians themselves should be looking at opportunities in their own backyard.
Why Foreign Capital Matters
Building large-scale renewable infrastructure is expensive. Wind farms, solar arrays, grid storage facilities and transmission upgrades all require billions of dollars in upfront capital. Ryan Cropp, also in the AFR highlights that global institutional investors, including pension funds, sovereign wealth funds and specialist renewable asset managers have been the backbone of this investment so far. These investors bring not only deep pockets but also expertise in structuring, operating and scaling renewable projects. (2)
If tax changes reduce post-tax returns, the AFR notes, those investors have alternatives. They can divert money into other jurisdictions that are actively courting capital with attractive incentives. This is not a hypothetical risk. Competition for renewable investment is intensifying, particularly as the United States and Europe ramp up their own green industrial policies. Australia cannot afford to make itself less attractive at such a critical juncture.
Why Australia Is a Good Place to Invest
Despite these concerns, as the AFR points out, Australia remains a strong investment destination. The country enjoys abundant renewable resources. The policy environment, while not without its complexities, is becoming increasingly supportive, with governments at both federal and state levels committing to ambitious emissions reduction targets.
Australia also offers a stable political system and robust regulatory framework, both of which are vital for investors committing capital over multiple decades. Energy demand is rising, driven by electrification of industry and transport, and the need to replace ageing coal assets. This creates a long pipeline of projects, giving investors visibility and confidence in future opportunities.
For overseas investors, Australia offers another advantage: proximity to fast-growing Asian markets. Many of the technologies and commodities required for the energy transition, such as green hydrogen and critical minerals, are positioned to play a key role in regional trade flows. That positions Australia not just as a domestic renewable energy market but as a hub within the wider Indo-Pacific energy landscape.
Why Australians Should Also Look Closer to Home
The AFR also makes clear that much of the renewable energy investment to date has been dominated by offshore capital. While this has been essential, it raises an important question: why aren’t more Australians participating directly in these opportunities?
Local investors (from superannuation funds to family offices and high-net-worth individuals) have an opportunity to support projects that will both decarbonise the economy and provide competitive returns. Investing at home has two clear advantages. First, it allows Australians to benefit financially from the transition rather than simply watching overseas investors capture the gains. Second, it ensures that projects are delivered in a way that aligns with domestic priorities, including regional development, employment and community engagement.
Australia has one of the largest pools of pension savings in the world. Mobilising even a fraction of those funds into renewable infrastructure could transform the speed and scale of the transition. While regulatory settings will always influence the mix of foreign and domestic capital, the strategic imperative is clear: Australians should be co-investors, not just hosts.
Balancing Tax Policy with Climate Goals
The AFR emphasises that the debate over CGT changes highlights a broader policy tension. On one hand, governments need to ensure the tax system is equitable and sustainable. On the other, they must deliver on climate and energy targets that require unprecedented investment. If tax policy inadvertently drives capital away, the latter objective becomes much harder to achieve.
The challenge is to strike a balance. Investors are not calling for special treatment, only for certainty and competitiveness. Clarity on tax rules, long-term policy stability and consistent regulatory processes all contribute to lowering risk premiums and encouraging capital flows. In the absence of these, projects will stall, costs will rise, and Australia risks missing its climate commitments.
The Bigger Picture
The transition to renewable energy is not optional. It is the pathway to decarbonisation, energy security and long-term economic prosperity. The AFR reports that the investment required runs into the hundreds of billions of dollars. That cannot be delivered by government budgets alone. It requires the combined resources of global and local investors working in tandem.
Australia has a once-in-a-generation opportunity to lead. With world-class resources, a sophisticated financial system and a pressing need to replace fossil fuel capacity, the foundations are already in place. The question is whether policy settings will support or hinder that leadership.
The Bottom Line
The AFR makes it clear that proposed changes to Capital Gains Tax risk undermining Australia’s attractiveness as a renewable energy destination at the very time when more capital is needed. For Australia to achieve a renewable future, it must remain open to global investment while also encouraging Australians to invest in their own energy transition. The balance between tax policy and climate goals will be crucial. If struck correctly, Australia can secure both the capital and the confidence required to deliver its renewable ambitions.
References
J Kehoe. Tax on renewables threatens climate targets. Australian Financial Review, 10 September 2025. https://www.afr.com/policy/tax-and-super/tax-on-renewables-threatens-climate-targets-20250910-p5mu04
R Cropp. Foreign capital key to $20b annual renewables spending. Australian Financial Review, 24 September 2025. https://www.afr.com/policy/energy-and-climate/foreign-capital-key-to-20b-annual-renewables-spending-20250924-p5mxig
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