A Sustainable Investment in Journalism

A sustainable business requires diverse revenue streams. ESG Investor now operates a subscription service as of Tuesday 14th May. To find out more please get in touch with our subscription team on subscriptions@esginvestor.net

Commentary

Momentum Building on the Path to 2050

Tim Day, Investment Fund Manager at Trina Solar, explains the importance of Europe’s sustainable investment community in the growth of solar power.

It’s no secret that the renewable energies industry is crucial to meeting the needs of society without harming the planet for present and future generations. To effectively tackle the climate crisis, organisations focused on renewable technology such as solar energy must be backed by investors to propel projects forward and meet targets.

In Europe, there is a thriving sustainable investment community that recognises the urgent need to help the solar industry innovate, grow and deliver the promise of PV technology to more people across the continent and beyond.

According to Preqin’s ESG in Alternatives 2023 report, assets held in alternative ESG funds surged from US$29 billion to US$92 billion between 2020 and 2022, with European firms driving the bulk of this. The UK, Germany, Spain, France and Italy represent the countries with leading solar energy investors, which include Low Carbon, Quinbrook, Cubico, Schroders Greencoat, NextEnergy Capital, Encavis, Aurea Capital Partners, Sonnedix, Aquila and A2A.

Collectively, mainland Europe and the UK is targeting net zero by 2050 – an objective set out as part of the European Green Deal by the European Commission – and realising this target will require significant investments in clean energy year on year. In the coming years, the EU’s Solar Strategy foresees 320 gigawatts (GW) by 2025 and 600GW by 2030 alone.

This places huge demand on all parties involved in the PV industry, from investors through to manufacturers, installers and end users. Investment is the catalyst in the ongoing growth of PV, and will be integral in ensuring solar is well-positioned to help meet our net zero targets.

Europe’s key markets

In the EU, the 2020 green taxonomy kicked off a new wave of sustainable investment by defining common standards, increasing market transparency and defining economic activities most needed for the transition, in line with the European Green Deal objectives. EU regulation goes hand in hand with a decade-long trend of increased focus on green investment in the EU.

In the UK, significant investments are being made in low-carbon sectors, driven by innovations across the country and tuned-in investors who are working to find commercially viable ways of investing in renewables.

According to the UK Government’s 2023 Green Finance Strategy, annual investment in this area has more than doubled over the past five years, with £50 billion of new investments being made in 2021 and 2022. One innovative partnership that has been struck in the UK is between Trina Solar and Law Carbon, in which a three-year framework agreement was established to support Low Carbon projects with Trina modules. This will enable Trina and Low Carbon to continue to accelerate the deployment of renewable energy at scale.

Spain has rapidly become a leader in ESG investment, with its number of sustainable funds having grown tenfold since 2014, making it one of the most lucrative markets in Europe today. The government’s commitment to carbon neutrality by 2050 is further fuelling investors to prioritise sustainable development and responsible business practices in their funds.

Solar energy is particularly important in Spain, which sees more than 3,000 hours of sun a year. According to EU Market Outlook, solar power is entering a maturity phase in the market with almost 11GW being installed since 2020, which is a 117% increase on the previous three years. This makes investment in this area particularly appealing, and in January 2023, this was confirmed when Norges Bank Investment Management agreed to acquire a 49% stake in a 1.3GW portfolio of solar plants and wind farms in Spain. Similarly, Aquila European Renewables has invested in four Spanish solar PV assets in southern Spain.

Germany, in turn, is the largest solar market in Europe – in part due to considerable government efforts to align its stance on renewable energy with its 2030 targets to meet 80% of its electricity demand with renewable resources, and to become fully decarbonised by 2035.

In 2022, the German government adopted its ‘Easter Package’ which set a target of 400GW of total installed PV capacity by 2040, and it continues to build on this momentum. With the dedicated solar laws Solar Package I and II, the government brings concrete measures for accelerated deployment of solar PV to the table. It’s therefore no surprise that sustainable investment is a core focus for the German finance community.

According to financial industry association Forum Nachhaltige Geldanlagen, investments in sustainable financial products increased by more than% in the market in 2021, and this figure is expected to grow further.

Investment brings major benefits

For the solar PV industry, investment is critical in enabling more households and businesses to transition to solar energy, and the benefits this brings are clear for all to see. To reach climate neutrality, the industry must heavily invest in greening their energy use, which means focusing on renewable energy deployment and equipment adaption. Investment cuts costs for all stakeholders from manufacturers right down to end users, and even across industries.

For example, new capacity of renewable energy sources added since 2000 reduced the electricity sector’s fuel bill in 2022 by over £130 billion in Europe. Collectively, this creates long-term planning certainty and investors know that they are fuelling the green transition with a powerful and popular climate solution.

This is especially pertinent as fossil fuel prices rise and solar installation costs fall. Businesses and individuals can benefit from decades of accumulated expertise in solar electricity and constantly evolving technology, all of which is much less likely to be impacted by fuel price fluctuations or energy security issues, and is available at a much better price than just a few years ago.

It’s crucial that solar companies work closely with investors for the long term. Some solar PV manufacturers have dedicated teams of investment and technical experts to establish strategic, sustainable partnerships with global knowledge and local expertise. This helps investment partners feel supported throughout framework agreements, while unlocking solar power for all.

As the last few years have shown, sustainability and solar energy are becoming increasingly important to people, businesses and governments across Europe. Given the importance of investment to the solar PV industry, it’s a huge step forward that investors are demonstrating their commitment to the green revolution. If this momentum continues, Europe’s net zero target stands a very good chance of being met by 2050.

 

 

The practical information hub for asset owners looking to invest successfully and sustainably for the long term. As best practice evolves, we will share the news, insights and data to guide asset owners on their individual journey to ESG integration.

Copyright © 2024 ESG Investor Ltd. Company No. 12893343. ESG Investor Ltd, Fox Court, 14 Grays Inn Road, London, WC1X 8HN

To Top
Share via
Copy link
Powered by Social Snap