Investing in a green economy

What does the investment landscape look like?


As the UK looks towards recovery from the Covid-19 crisis and businesses start to adapt, the Clean Energy sector is calling to ensure that a greener economy remains at the heart of any recovery strategy.

Recently the Aldersgate Group launched a new report: Rebuilding to last: UK must not go back to the old normal which followed their recent policy briefing, Seize the moment: building a thriving, inclusive and resilient economy in the aftermath of Covid-19, showcasing a wide range of low carbon and environmental projects that could address some of the key economic and social challenges facing the UK following the Covid-19 crisis. 

The question remains, where is the investment going to come from? Maria Connolly, head of Clean Energy and Kay Hobbs, corporate partner, share their thoughts on what the investment landscape looks like:

"While there was already a trend towards Environmental, Social and Governance (ESG) aligned investment prior to Covid-19, the pandemic has without a doubt rightly focused attention. Not only have ESG aligned investments performed better during recent months but awareness of ESG, and it’s role in achieving net zero, has been heightened. This has very much been reflected in investor appetite, there may be increased scrutiny around project modelling and risk mitigation but the overall message to the market from banks and investors continues to be - we’re open for business.

If, going forward sustained emphasis is placed on lending against ESG criteria then this is likely to positively impact the sectors’ ability to access funding - channelling funds into the development of clean energy projects could be seen to be an easy win which supports carbon reduction, job creation and local supply chains,” comments Maria Connolly.

"There is huge investor appetite for the clean energy generation projects which will support the UK in achieving net zero. Beyond the traditional investments in subsidy-backed portfolios of operational assets, we’ve seen an increase in appetite to invest at an earlier stage alongside the developer, whether that’s at the shovel-ready point or, increasingly, even prior to that when projects are still at the greenfield stage. Those investments have also moved with the progression of the sector into subsidy free assets and into less conventional technologies such as energy storage assets. 

The huge slump in energy demand caused by Covid-19 means that the growth in renewable generation, coupled with the grid-balancing services of energy storage, will see renewable energy contribute to a greater percentage of the overall demand for energy thereby reducing the need for fossil fuels even further. In addition, investors are also keen to diversify their portfolios there has been an increased interest in more nascent technologies such as Electric Vehicle Charging Infrastructure, Cleantech, hydrogen etc, particularly as investors get more comfortable with the project modelling and revenue streams,” comments Kay Hobbs

 

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