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  • Jun 18
  • Raghav

With the growth of both chemical technology and fintech, the future of renewable energy seems promising in the current state of uncertainty present throughout the world. This has been supported by the behavioral change evident amongst numerous countries, with most becoming more “conscious” about significant issues such as climate change. This is evident in the investment behaviors of numerous investors across the U.S. as Environmental, Social, and Governance (ESG) asset class constituted over $12 trillion dollars’ worth investments in the US market in the past year.



The behavioral change of millions of people across the globe towards climate change and sustainability is creating a huge commercial opportunity for companies finding solutions to such issues. This need for change at a humongous scale is driving investors to invest in companies whose missions revolve around such pertinent issues and catalyze the change further. Amasia, a venture capital based in Singapore claims, “In our view the intersection between “fighting the climate crisis”, “above benchmark returns”, and “Think Global, Act Local” lies in backing companies that have a material impact on human behavior in ways that combat the climate crisis.” The future of companies involved in such an industry looks bright, with investors parking their money in such safe havens, given the uncertainty surrounding global investments and many pundits predicting the next recession as well as health issues encompassing the rise of coronavirus.



Numerous VC’s/Private Equity firms are steering their investments towards safer and more sustainable companies. According to BBC research, the global renewable energy industry reached $476.3 billion in 2014 and is expected to grow at a 10.3% compound annual growth rate to $777.6 billion by 2019. The clear rise in the industry is advocated not only by behavioral change but also the acceptance of technologies that facilitate such change to preserve the natural environment. For example, View Inc., a nanotechnology company, prides itself in manufacturing smart and energy efficient windows that store solar energy as well as tint automatically based on the levels of sunlight outside. The firm has already secured $1.1 billion investment from Softbank and is riding high on hopes to go public soon. Further, the shift in the asset management industry from active to more passive investments has triggered the rise in such socially responsible investments. Investors, by utilizing technology, have shaped investments around a more stable portfolio of investments, with a large chunk allocated to the ESG asset class. According to Vanguard, for investors in the U.S., more than 350 ESG funds and ETFs are available, representing a total of $89 billion in assets under management. This not only marks the change in active to passive but also the change in investment attitudes towards more socially responsible assets.

However, a reasonable chunk of credit for the change in investor behavior should be given to the regulations provided by the government of different countries. Governments have increasingly embraced these concerns by passing mandates to limit the volume of harmful emissions. In December 2015, representatives from 195 countries at the 21st Conference of the Parties of the UNFCCC in Paris adopted the Paris Agreement to deal with greenhouse gas emissions, adaptation, and finance starting in the year 2020, which could set the stage for a growing number of regulations around the world. In my opinion, the government should ease the access to such technologies and encourage privatization of the energy sector to continue driving incentives for investors in this industry. Through this, the government will provide itself with a chance to boost employment and foster social responsibility among the citizens of the country.



Thus, although the energy industry has experienced volatility in the past, the future seems promising filled with growth opportunities in the face of tackling climate change. Needless to say, the government will continue to play a crucial role in the development and scaling of companies involved in the industry.



Bibliography


Kuepper, Justin. “What to Know About Investing in the Global Renewable Energy Sector.” The Balance. The Balance, April 11, 2019.
https://www.thebalance.com/how-to-invest-in-the-globalrenewable-energy-sector-4056875.

“ESG Investing: Where Your Money Can Reflect What Matters to You.” Vanguard. Accessed March 6, 2020.
https://investor.vanguard.com/investing/esg/ .

Raghavendran, Ramanan. “Amasia on the Climate Crisis 3/3: Our Investment Focus.” Getting Global. Getting Global, November 11, 2019.
https://www.ramanan.com/personal-blog/amasiaon-the-climate-crisis-33-our-investment-focus .

UNFCCC. Accessed March 6, 2020.
https://unfccc.int/process-and-meetings/the-parisagreement/the-paris-agreement .

“View Announces $1.1 Billion Investment from the SoftBank Vision Fund to Meet Accelerating Demand.” | Business Wire, November 2, 2018.
https://www.businesswire.com/news/home/20181102005271/en/View-Announces-1.1-BillionInvestment-SoftBank-Vision


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