A move towards green investments is set to continue apace as institutional investors seek to protect their portfolios from climate change risks.
Pension companies and other large investors are increasingly realising the advantages of protecting their investments from the ripple effects of volatile fossil fuel prices, as well as avoiding the risk of being left with stranded assets as the world moves towards a low-carbon future.
The past two years have seen climate related risk highlighted as governmental-level policy around the globe has switched the focus to the need for a sustainable energy and transportation policy.
This change in emphasis is giving financial instruments, such as green bonds, the status of mainstream investments as the sector emerges from its previous niche. Such is the momentum building in sustainable investments that analysts believe President Trump's decision to pull the USA out of the Paris Climate Change Agreement will be little more than a slight impediment to progress rather than a barrier.
The recent annual report on global trends in renewable energy investment by the United Nations Energy Program and Bloomberg New Energy Finance shows that the renewables sector, with wind and solar power to the fore, was worth US$241.6 billion in 2016. For the fifth year running investments in renewables were higher than those in fossil fuels.
As technology improves and policy switches to a low carbon future institutional investors are looking at the opportunities of renewables as well as the risks becoming apparent in fossil fuel-based energy markets, according to Mathew Nelson, climate change and sustainability services leader with Ernst & Young.
A recent survey by Ernst & Young of 320 institutional investors found they were giving far more attention to climate change and sustainability when it comes to making investment decisions.
Asset owners, public companies, investors and regulators want more information when analysing climate-related risks and opportunities. In many cases, once armed with the information, they are changing their strategy to divest from fossil fuel in order to avoid stranded assets. Investments in renewables are increasingly attractive, backed as they are by policy, and in many cases subsidies and incentives.
Public opinion and investor sentiment too are also having an impact on corporate strategies. There is certainly a growing feeling that renewables are not only good for the bottom line, but also provide the opportunity to create a sustainable future. OPEN Cleantech was formed with this aim in mind, seeking a diverse selection of innovative, cutting edge renewable energy projects and cleantech companies to include in the OPEN investment opportunities.