Policy Certainty Needed to Boost Clean Energy Transition

Investors call for action as report underlines strengthening returns from clean energy.

Governments need to standardise and align their global net-zero emissions targets if they want to incentivise investors to back clean energy, a major global summit was told today.

The importance of the clean energy sector was discussed by international climate and energy leaders from over 40 countries at the Net Zero Summit. The event was co-hosted by the International Energy Agency (IEA) and COP26.

Policymakers said investors will play a key part in growing the clean energy sector while simultaneously reducing global greenhouse gas emissions.

However, investors first need to see a clear direction of travel in governments’ plans to achieve their own net-zero emissions targets, said Stephanie Pfeifer, CEO of the Institutional Investors Group on Climate Change (IIGCC).

“Investors encourage governments to commit to net-zero emissions by 2050, but also to set out clear pathways to achieve this, including ambitious interim emission reduction targets sectoral decarbonisation roadmaps that set up the timetable for sector transition milestones and expectations on technology and infrastructure development,” she said.

“It’s critical that we get our policies and regulations right. Without this, the market won’t respond in the ways that we need it to,” agreed Seamus O’Regan, Minister of Natural Resources for Canada, who co-chaired the panel.

Pfeifer asked policymakers to incentivise and support emergent clean technologies with “strong price and regulatory signals”.

The IEA previously announced it would be publishing a report on May 18, which will serve as a roadmap for governments, companies and investors to decarbonise the energy sector and transition to wholly clean energy.

Pfeifer noted that the report will also help to guide investors in their interactions with portfolio companies as they develop their business models to drive sustainable change in the energy sector.

Ahead of COP26, which is scheduled to take place in Glasgow in November, countries have been making their own net-zero pledges and are due to update their nationally determined contributions (NDCs) in the coming months.

Clean energy drives returns

Gunther Thallinger, Chair of the Net Zero Asset Owner Alliance, which currently has almost US$6 trillion in AUM, said policymakers need to better ensure participation by a wide range of investors.

“We are looking forward to discussing these clean energy projects [with governments]”, he said, adding that the Alliance would like to see policymakers “intensify the dialogue around identifying existing clean energy projects”.

Clean energy is already providing investors with strong and consistent returns which should further encourage wider investor participation, according to a new report by think-tank Carbon Tracker.

Comparatively, the value of share offerings in fossil fuel companies has dropped by almost 20% in the eight years since 2012. Between 2012 and 2020, investors bought US$640 billion in equities issued by fossil fuel producers, dependent utilities and service companies, losing US$123 billion.

Over the same timeframe, investors bought US$56 billion in equity from clean-energy companies which have seen a US$77 billion increase in value.

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