Editor's Note: This post originally appeared on the IEEFA blog.
By Tim Buckley
In a must-read report released this week on fast-changing energy markets, the National Bank of Abu Dhabi signals a once-in-a-lifetime opening for investors in Middle Eastern renewables and energy efficiency.
The report, “Financing the Future of Energy: The Opportunity for the Gulf’s Financial Services Sector,” carries the imprimatur of researchers at the University of Cambridge and PwC. Australian readers will be familiar with the author of its forward: none other than Alex Thursby, CEO of the National Bank of Abu Dhabi, and previously the very successful chief executive of international & institutional banking at ANZ (Australia & New Zealand Banking Group Ltd).
What really jumps out, though, is where the report comes from, namely the epicenter of the fossil-fuel world. And while it focuses on investment opportunities in the political and economic union made up of the Gulf Cooperation Council — Bahrain, Kuwait, Qatar, Oman, Saudi Arabia and the United Arab Emirates — its conclusions can be carried over in many ways to other parts of the world. Asia and Africa are mentioned in particular.
Here are the “four pillars” of awareness the paper presents:
One of the takeaways is that institutional investors and banks must be proactive about this opportunity and must nudge governments toward “greater stability and support for sustainability ambitions and policies,” a trend that would summon a stampede of investors (“the finance sector will be there to back projects that are consistent with that support”).
The report also illustrates a basic truth about energy development and profitability: value creation is achieved at the nexus of public and private interests. Successful deployment of renewables and development of energy efficiency is more about setting a proactive policy framework that adds balance to an old system that has promoted fossil-fuel development to the detriment of innovation in other energy sectors.
The document offers detail on how Germany has already proven the national viability of renewables, how popular sentiment against fossil fuels is gaining momentum in China’s huge cities, and how solar- and wind-energy development, are now on parity cost-wise with carbon-based energy. It even suggests practical tips on investing, including notes on how “green sukuks” would work (sukuks are Shar’iah-compliant bonds).
The report is loaded with numbers, of course, but perhaps the two most notable ones are these:
Tim Buckley is IEEFA’s director of energy finance studies, Australasia.