The New Energy Landscape Part I: Impact and Sustainable Energy Investing

By Marta Maretich

Energy is set to be a key global concern for the foreseeable future—and to continue to be an important focus for impact and sustainable investors. In this, the first in a two-part series on the new energy landscape, Marta Maretich explores the factors shaping the landscape and highlights some promising sectors for investment in energy.
Investment in the energy sector is set to boom over the coming years. The reasons behind this are well known, especially to environmentally conscious investors: Fossil fuels are becoming scarcer, energy costs are rising, levels of industrialization are increasing, as is global prosperity -- bringing increased demand for energy as well as unwanted side effects from its use, like pollution.

Recent findings about climate change are also driving a renewed interest in energy. A series of reports from the IPCC are shining a light on the urgent need to change the way we use energy as well as the types of energy we use. According its recent report, energy is responsible for 47 percent of the increase in anthropogenic (man-made) CO2 emissions—fossil fuel byproducts linked to climate change. High carbon-intensity energy, related to economic growth in developing countries, is an important contributor.

A changing climate for investment

These statistics mean that energy use is set to become an important front in the battle against runaway climate change. The U.N. is currently using them to inform its process of forging a new international convention on climate change. When this framework emerges in 2015, this in turn will have implications for investors as governments react by establishing new policies, setting regulation and, probably, funneling more public money into mitigation measures. Whether or not you accept the idea of man-made climate change, there’s little doubt that the IPCC’s reports will affect the outlook for investing in the energy sector.

All these factors—plus the fact that new technologies and approaches are proliferating—are making energy a focus for investors of all kinds, despite the fact that some alternative energy markets have proven volatile in the past. Today there are more ways to invest in energy than ever before and everyone seems to be looking for the technologies that will replace fossil fuels in our investment portfolios as well as our economies. Fortunately, there’s increased scope for investing as the clean and green energy market continues its path of growth and diversification.

Developments in recent years seem to indicate that there won’t be a single solution to the energy question. It’s more probable that there will be a wide array of approaches that form a patchwork of solutions for different applications. Many of these will be local, rooted in culture and geography, and investors who know how to spot an opportunity at the local level will reap the benefits, as will those who know how to support energy businesses as they scale up and roll out products and services on a wider basis.

Sticking with renewables

Solar power, wind power and hydroelectric generation businesses have long been staples in impact and sustainable investment portfolios. Global growth in the uptake of these technologies has been significant and the demand for renewable power continues to skyrocket. Impact capital has played a role in bringing clean technologies forward and introducing them into new markets. As a result, renewables now represent an evolved market and continue to have strong returns.

Against this background, investors like Triodos with its renewable energy fund, have already garnered considerable experience in investing in diverse energy solutions including hydroelectric, wind and solar. Others, like the Global Environment Facility (GEF) have been instrumental in financing specific energy technologies to fit local needs in countries as diverse as China, Mexico and Egypt.

With future outlooks positive, especially in light of advances such as new approaches to managing existing grids and new technologies coming online to improve energy storage thus making wind power more viable, these sectors remain good bets as we move into 2014.

Read more about high potential energy investments for impact and sustainable investors in The New Energy Landscape Part II: Growth Areas for Impact and Sustainable Energy Investment.

Image credit: lightwise / 123RF Stock Photo

About the author: Marta Maretich writes about impact, sustainable and social investing for Maximpact.com, a deal listing portal and information hub for the new finance sector. She is Chief Editor of the Maximpact blog. @maximpactdotcom

About Maximpact: Maximpact is a free global portal for the social, impact and sustainability sectors. It operates as a secure web-based listing service that allows sustainability, philanthropy and CSR professionals, as well as entrepreneurs, intermediaries, and funds to share information about initiatives and impact investment deals, online. For more information on the platform or to review latest impact projects visit: www.maximpact.com. This article first appeared on Maximpact’s blog.