Investment in the energy transition will increase if the renewables industry and associated sectors stop talking about climate change with financiers, experts told a conference this week.
Investors are more likely to move their money away from fossil fuels and into clean energy if their attentions are focused on profitability and the relatively low risks, the emPOWER energy-transition summit heard on Tuesday.
“You have to speak to the finance industry in terms of risk and return,” said investment banker Gerard Reid, partner at Alexa Capital and an adviser to the World Economic Forum.
“I’m not incentivised based on some carbon target or anything like that, I am incentivised on money. That’s what my job is. And my whole industry is like that,” he explained, adding that a lot of his fellow bankers “are not normal”.
“To communicate with these guys, I never ever mention the words ‘climate change’. Because if I mention the words ‘climate change’, guess what happens — I’m out of the door because I’m known as a left-wing Socialist Communist lunatic. That’s the way they brand me. So you have to speak to them in terms of risk and return.”
If I mention the words ‘climate change’, guess what happens — I’m out of the door.
The finance industry has started to reassess the risks of its fossil-fuel investments becoming stranded assets, opening up opportunities for less-risky clean-energy investments, Reid said, citing the words of Larry Fink, chief executive of the world’s largest asset manager, Blackrock, who wrote last month: “Investors are increasingly… recognising that climate risk is investment risk.”
Bertrand Piccard, chairman of the climate business solutions non-profit Solar Impulse Foundation, said when clean-energy advocates talk to renewables opponents — whether they be financiers or politicians — they should not talk about climate change.
“It’s very important when we go to see them to avoid speaking too much about protection of the environment,” said Piccard, who is best known for co-piloting the PV-powered Solar Impulse plane that circumnavigated the world in 2015-16. “Because if they cared about the protection of the environment, we would know it. They don’t care about that. They care about profits and job creation.
“If there was no climate change, shifting from polluting energies to renewable energies would be profitable, it would create jobs. Of course, we could not have used this argument five years ago, but today, it is clear. And I think it’s an argument we have to use much more.”
Jeremy Leggett — the founder and director of PV developer Solarcentury, and a member of the advisory board at think-tank Carbon Tracker — told the conference that global investment in renewables needs to increase from about $300bn a year to more than $1trn for the planet to keep to the 1.5C warming limit envisaged in the Paris Agreement. But he was optimistic that this shift in financing would soon be achieved.
“I’m pretty sure the dam is about to break,” he said. “It’s just a question of how quickly. We can see the direction of travel so clearly. The Norwegian state pension fund is a perfect example — built on oil & gas and no longer investing in pure-play oil & gas companies. Next year or the year after, I think that’s going to extend to the [oil] majors. And, of course, the converse is that they’re investing in unquoted renewable-energy companies for the first time.
I’m pretty sure the dam is about to break. It’s just a question of how quickly.
“You can smell the change in the air. As things stand, global investment in renewables went down last year. So it’s finely poised and we haven’t yet achieved the breakthrough. I really believe we’re going to do it, but there are people who are trying to hold us back.”
Reid pointed out that historically low interest rates means that now is the perfect time for investors to put their money into renewables, storage and other green technologies.
“The finance world is reacting to public pressure as well,” he said. “The capital is available. So the finance world will do its part to go to a zero-carbon economy.”
The emPOWER summit was co-hosted by WindEurope, SolarPower Europe, the Renewables Grid Initiative and Smart Energy Europe.