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How to win funds and influence people … renewably

Sustainable energy is not a bubble by-product of the credit boom but a global investment transition that is likely to strengthen over time, according to the latest UNEP Global Trends in Sustainable Energy Investment report. Wake up investors, renewable energy has arrived.

According to the UNEP report, which is conducted with SEFI and Bloomberg New Energy Finance, and analyses trends and issues in the financing of renewable energy and energy efficiency, new investment in sustainable energy in 2009 was the second highest annual investment ever.

In that year new investment in sustainable energy was $162 billion, and spending on new capacity, including hydro as well as other renewables, was bigger than the investment in new fossil fuel capacity, for the second year in a row.

The UN Under-Secretary General and UN Environment Programme (UNEP) executive director, Achim Steiner, says for the first time, China overtook the US for the top spot globally for overall sustainable energy investment – in 2009 it experienced a 53 per cent rise in financial investment in clean energy.

An example of this growth is its production of solar panels: in 1999 China made 1 per cent of the world’s solar panels, in 2008 it was the world’s leading producer with 32 per cent.

The country also saw a surge of investment, with $33.7 billion of $119 billion invested worldwide by the financial sector in clean energy companies and utility-scale projects, taking place in China.

This reflects one of the broader themes in the report, namely the shift in the focus of this industry from Europe and North America, to Asia.

Other key findings show that the clean energy share prices rose almost 40 per cent in 2009, with the WilderHill New Energy Global Innovation Index (NEX) which tracks the performance of 88 sustainable energy stocks worldwide nearly doubling.

Similarly financial investment in clean energy totalled $65 billion in the first half of 2010, about 22 per cent up on the same six months the year before, with investment in clean energy companies via the public markets and from venture capital and private equity players all rising in the first half of 2010.

It seems a low-carbon economy is coming – almost despite of any particular government’s incentives such as the pricing of carbon – with investment markets evolving regardless.

But while the trend is promising, the total amount of investment still falls very short of the amount of investment needed to have a meaningful impact on CO2 emissions.

And that’s where institutional investors can step in.

A number of European investors – ATP, Norway’s government pension fund and Sweden’s AP7 – are leading lights in this area. All have plans to increase their current commitments. [Norway’s sovereign wealth fund, it is reported, has a mandate to invest $3.1 billion in the space by 2015].

Make no mistake this is a good thing. Analysis by Bloomberg New Energy Finance, suggests that to reduce world CO2 emissions from the current level of about 42 gigatonnes (Gt) a year to 49Gt by 2030, would mean that global investment in renewable energy assets would have to rise from just over $100 billion in 2009 to $500 billion in 2030.

There aren’t many issues that you can truly say are a global social responsibility, but institutional investors are in a unique position. They have the ability to influence, in a way that still makes sense to their core fiduciary purpose. After all, money talks. *


*Another, completely unrelated, example of money talking, is in the role Cliff Asness, Daniel Loeb and Paul Singer (as well as reportedly other hedge fund and investment bankers) played in underwriting the campaign for gay marriage in New York, with the statute being adopted last week.

While no doubt they all had their reasons for doing so, including a generalist liberal approach to government, supporting a cause they believe in should be applauded. After all what’s the point of being rich if you can’t influence?




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