Despite a drop in global clean energy investments in 2013, institutional investors meeting at the United Nations early this week expressed strong agreement on the urgency for boosting investments in low-carbon technologies and the major growth potential for ramping up green bonds and other clean energy investments to the levels necessary to avoid devastating climate change impacts. Much of the discussion focused on elevating clean energy investments by an additional $1 trillion per year in order to limit global warming to two degrees. To this end, Ceres has released a report with 10 recommendations for investors, companies and policymakers to scale up clean energy investments to $500 billion per year by 2020 and $1 trillion per year by 2030.
Global clean energy investment was $254 billion in 2013, a 12 percent drop from the revised $289 billion in 2012, according to Bloomberg New Energy Finance, who attributes the decline to a continued sharp reduction in cost of photovoltaic systems and impacts on investor confidence due to policy shifts regarding renewable power in Europe and the U.S.
The Ceres research acknowledges the barriers to investing an additional $36 trillion in clean energy between now and 2050 — the levels the International Energy Agency has called for to limit global warming — but also focuses on the opportunities associated with clean energy investments and the risks posed to institutional investors’ portfolios by not taking action.
“Cost competitive renewable technologies and attractive investment opportunities exist right now, but we’re still not seeing clean energy deployment at the scale we need to put a dent in climate change,” said Ceres President Mindy Lubber. “Companies and investors must support the adoption of the necessary policies that that will open the floodgates for investment capital from all asset classes to flow into clean energy.”
Investors were urged by Christiana Figueres, executive secretary of the United Nations Framework Convention on Climate Change, to continue seeking opportunities to invest profitably in clean energy solutions and support the international climate process.
“Governments and investors have pivotal, mutually supportive roles to play in accelerating the transition to the low carbon economy — one that can combat climate change, generate jobs and tackle a range of challenges from natural resource scarcities to health-hazardous air pollution,” Figueres said at the UN meeting. “Smart policies, creative incentives and innovative financial instruments by governments are already catalyzing a shift. It is time to scale these up worldwide. Meanwhile, investors need certainty, a phasing out of fossil fuel subsidies in order to level the playing field and full disclosure of companies ‘carbon footprints’ in order to make informed decisions.”
There is good news, however. Investment in clean energy via the public markets more than doubled as rising share prices restored some confidence in the shares of solar and wind manufacturers. Investors also showed enthusiasm about new areas such as electric vehicles and renewable power project funds.
“Despite the drop in global investments in 2013, it is possible to close the investment gap by first, bringing capital costs down for clean energy projects and second, more properly pricing fossil fuel capital costs which are artificially low,” said Mark Fulton, senior fellow for Ceres. “There needs to be a global push to put the necessary financing vehicles and policies in place to bring capital costs down and enable the capital markets to realize clean energy’s vast potential.”
Ceres’ 10 recommendations for filling the clean energy investment gap are:
Develop capacity to boost clean energy investments and consider setting a goal such as 5 percent portfolio-wide clean energy investments.
Elevate scrutiny of fossil fuel companies’ potential carbon asset risk exposure.
Engage portfolio companies on the business case for energy efficiency and renewable energy sourcing, as well as on financing vehicles to support such efforts.
Support efforts to standardize and quantify clean energy investment data and products to improve market transparency.
Encourage “green banking” to maximize private capital flows into clean energy.
Support issuances of asset-backed securities to expand debt financing for clean energy projects.
Support development bank finance and technical assistance for emerging economies.
Support regulatory reforms for electric utility business models to accelerate deployment of clean energy sources and technologies.
Support government policies that result in a strong price on carbon pollution from fossil fuels and phase out fossil fuel subsidies.
Support policies to de-risk deployment of clean energy sources and technologies.
Source: Fierce Energy.com