Last year was challenging for everyone globally, and the clean energy industry wasn’t an exception. Supply chains suffered disruptions and energy demand fell dramatically. Long-term planning proved troublesome owing to these challenges, with the unpredictable trend of covid-19 the only guide for the next course of action.
It is amazing how the industry ended 2020 in a strong position and entered 2021 with momentum. This year is likely to be the finest recorded year for renewable energy. Solar energy is at the forefront of this recovery process. As we look forward to what this year has in store, it is worth analyzing the breakthroughs achieved so far in renewable energy investments.
Increased Clean Energy Investments
Oil and gas producers have dominated the global energy market for the last century. However, clean energy investments are slowly changing the tide as calls to avert climate change increase.
From January to September 2020 compared to the same period in 2019, the insights are remarkable. The key to note is that gas and oil firms were making losses during this period. For instance, earnings for BP fell by $22 billion, while Exxon lost earnings by more than 100%.
Fig 1: Change in Market Capitalization between 2016 and 2020 (sourced here)
With the increased shift of portfolios from traditional sources of energy to renewables, investment trends have been affected. It isn’t particularly clear if the Big Oil will play second-place beyond the post-pandemic economic recovery period, but research shows that renewables are establishing even in these difficult times.
Investment Potential in Different Regions
One year since the pandemic struck, a report by the UNEP highlights the prospects of economic growth. According to Inger Andersen from the global organization, “Governments have a unique chance to put their countries on sustainable trajectories that prioritize economic opportunity, poverty reduction and planetary health at once – the Observatory gives them the tools to navigate to more sustainable and inclusive recoveries.” Some countries are taking the cue and acting.
The US had a challenging electioneering period in 2021, but that is set to change with the new administration in place. Market analysts agree that President Biden’s infrastructure plan will be instrumental in furthering the renewable energy agenda this year. Anna Paglia from Invesco feels that the space will benefit immensely from technological growth and friendly policy changes.
Investors can peg their hopes and aspirations for a more robust RE space on the fact that corporate America is embracing renewable energy. Companies are asking themselves, how can we better the environment? How do our activities affect our clients? CTEC’s Jacobs believes that these are signs that dollars will start flowing and promoting renewable energy investing in America.
Europe is proudly holding the mantle in clean energy investment, if recent plans for investments in the space are anything to go by. A report by the Clean Energy Wire CLEW indicates that investments in wind and solar energy could approach the one trillion Euros mark by 2030.
Some of the upcoming massive investments will be spearheaded by EnBW Energie Baden-Württemberg AG and Rheinisch-Westfälisches Elektrizitätswerk AG, both German utilities. Their combined investments in clean energy by 2025 could total 10 billion Euros. RWE’s Markus Krebber is reported to have said, “The funds for the EU Green Deal, but also the coronavirus aid, open up a great opportunity to build up a new, sustainable industry faster than would be the case in normal times.”
Who are the Proponents of Renewable Energy Investing?
Following the UN Conference on Environment and Development (UNCED) of 1992, the international community has continuously pursued sustainable development. Governments were encouraged to put in place measures that support Agenda 21 and the Rio Declaration.
Governments are the main drivers of these measures, but they are also culprits when it comes to missing targets. Prolonged financial crises and food insecurity are a concern to scientists and economists globally.
It is not all tragic though, as governmental investments in clean energy have been promising of late. Take for instance in 2019, the US investments totaled $54.6 billion; Europe injected about $54.6 billion, while the global investment in clean energy was $282.2.
China’s investments in the sector fell in the same period, but they were still at $83.4 billion. The real situation is clearer when you consider that Beijing has committed to adopting more stringent measures and policies to achieve carbon neutrality before 2060 and peak carbon dioxide emissions within 9 years.
In line with governments’ commitments, private entities are making their voices heard in the furtherance of the green economy in 2021. Financial institutions have been visible in these efforts, especially in regards to the decarbonization of the shipping industry. One notable initiative is the partnership involving popular global shipping banks to pursue UN climate goals. Credit Suisse, BNP Paribas and others committed to the “Poseidon Principles”. The initiative is aimed at ensuring lending portfolios align with UN climate goals.
When all is said and done, the global speed of investing in renewable energy and dropping fossil fuels is still slow. At the current pace, catastrophic results of climate change are still imminent. The good news is that the foundation is already in place. What’s left now is the implementation phase. Here are some areas governments can emphasize to realize renewable energy investing results:
- Set appropriate targets and take action: while this analysis shows that some governments have set green economy targets, many targets are not in line with scientific decarbonization strategies. Investments in industry-specific plans must be encouraged to bring the right technology and enough capital.
- Better grid management: For some, the biggest challenge in investing in renewable energy is the variable nature of this source. This can be overcome with cooperation between grid managers and governments for modernized energy transmission and management.
- Societal Support: Did you know that global renewable energy generation needs to increase 9 times to adhere to the Paris Agreement? The governments and private sector alone cannot make the transformation to a green economy successful. Policies and plans must therefore accommodate all stakeholders.
Whilst the mandate to prioritize green recovery plans in the post-pandemic period exists, success is only possible with decisive leadership and governmental support. Government officials and other people in authority need to implement any pledges to actualize renewable energy investing goals.
By investing in renewable energy skills, technology and infrastructure with the goal of promoting sustainable economies, nations can emerge from the tough COVID situation more prosperous and greener. When this happens, businesses will benefit, but the impact will be far-reaching because the affected countries will be recognized the world over.
Invest in renewable energy
You don’t have to be a renewable energy expert to gain diversified exposure to the market.
A social trading platform like eToro allows you to copy trades of other traders or even buy an entire basket of shares, for example, you can choose to copy automatically renewable energy portfolio: “RenewableEnergy CopyPortfolio allocates in stocks, based on eToro’s asset universe, of global leading renewable energy companies that use clean sources such as Solar, Wind and Hydrogen, and also allocates in stocks of companies that deliver the most updated technologies behind the systems used for Renewable Energy Production.”
There are endless ways you can get exposure to the renewable energy market via social trading platforms and we will show you more about it in future articles.
Disclosure: socialtrading101 is not an investment advisor, and this article is not meant to be a recommendation of the purchase or sale of stock. Investors are advised to review all company documents and press releases to see if the company fits their own investment qualifications.