Investing in clean energy makes financial sense, say experts

Investing in clean energy rather than fossil fuels is an attractive choice for investors concluded experts at a Business School webinar.

In a webinar organized by the Executive Education team at Imperial College Business School, academics and industry leaders gathered for a discussion on how capital allocation and financial performance are shaping the future of the energy sector.

The event was part of a new monthly webinar series called Imperial Future Matters which is hosted Executive Education and designed to bring together Imperial academics and key figures from industry to debate the global challenges facing businesses.

Drawing upon insights from a recent report from Imperial’s Center for Climate Finance & Investment in collaboration with the International Energy Agency, the webinar examined the extent to which investing in clean energy has made financial sense over time and how recent dramatic changes in market fundamentals is affecting the relative attractiveness of fossil fuels compared to renewables.

According to the report, renewable power is outperforming fossil fuels in US and European markets. The report reveals that despite the growing profile of renewables, the total investment in clean energy is still performing well short of the level needed to put the world’s energy system on a sustainable path.

Publically-traded renewable power portfolios have posted significantly higher returns for investors and lower volatility over fossil fuels during the past 10 years and during the COVID-19 crisis. However, capital allocation to renewable power via stock markets is falling short of government goals due to other obstacles facing investors.

Presenting the findings of the report to a virtual audience of industry leaders, students, alumni and journalists, Dr. Charles Donovan, Executive Director of the Center for Climate Finance & Investment at the Business School said: “We are in the midst of a clean tech miracle—in particular with regards to solar power. We are 10 to 15 years ahead of schedule due to a revolutionary set of changes. If there’s any problem, it’s that solar power is too cheap today.” There’s real momentum gathering behind renewable power, based purely on their economic advantage. Our results show that renewable power is outperforming financially, but has still not attracted sizable support from listed equity investors.”

In a later part of the discussion Michael Waldron, Senior Energy Investment Analyst at the IEA and co-author of the report said: “There’s a range of solutions and technologies which are needed for decarbonisation—some of those are not ‘clean’ per se but they have to do with reducing emissions from high-emitting industries, such as production of methane emissions from oil and gas and so we see all of those types of solutions as being instrumental to achieving long-term sustainability goals.”

Following the presentation, industry figures weighed in with their perspectives on the key issues. Zoe Knight, Managing Director, Global Head, HSBC Center of Sustainable Finance at HSBC Holdings PLC said: “In emerging markets, one way to improve things post-COVID is to help liberalize the energy sector in order to bring in either direct investment on a national basis or foreign direct investment from corporates that are operating globally and have made pledges to deliver 100% of their power needs from renewables. This will help to attract the capital that the country needs and in turn decarbonise and create different jobs as we exit COVID.”

Reflecting on the webinar, David Brown, Director of Executive Education at Imperial College Business School said: “Our Imperial Future Matters webinar series brings together academics and industry leaders to debate the global challenges facing businesses. Climate change is a major and immediate concern for businesses and it was great to be able to share insights and explore practical actions required by businesses, investors, government and regulators to make our society more sustainable.”

By Laura Singleton, Evie Burrows-Taylor, Imperial College London (phys.org)

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