Long-term financing of the economy: The supply of financing and the demand for financing

OECD economies need to significantly increase their long-term financing: financing for energy transition investments, and investments to improve and maintain biodiversity. Given the rise in nominal and real long-term interest rates and policies to reduce liquidity, we seek to determine whether long-term financing of the economy has become easier or more difficult. There is an argument on the supply side that long-term financing of the economy has become easier due to the rise in real interest rates: savings are less attracted to investments in speculative assets (real estate, for example) because of the fall in the price of these assets; the supply of financing therefore normally shifts to long-term loans, which are more profitable. But there is an argument on the demand side that long-term financing of the economy will become more difficult. Long-term investments sometimes have low returns ( decarbonisation of industry or transport, thermal renovation of buildings). If long-term real interest rates are higher, some of the investment required will generate a lower return than bonds (or long-term loans). So in the future we will probably have: An increase in funds that can be invested in long-term projects; But a decline in the size of investment projects with sufficient returns.