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Coronavirus can provide catalyst to greener future

Octopus Renewables report finds institutional investors believe pandemic could drive increased investment towards a greener future

Dominic Ellis
|Nov 24|magazine9 min read

COVID-19 opens the door to more green investment as it has given governments, businesses and investors an opportunity to concentrate on fighting climate change, according to a leading renewables investment firm.

Octopus Renewables, part of the UK-based Octopus Group, says fighting global warming without large amounts of investment into renewable energy generation and technologies will making achieving the targets of the Paris Agreement impossible.

“COVID-19 can be the catalyst to a greener, more sustainable future,” explains Alex Brierley, co-head of Octopus Renewables. “But it needs to be a collaborative and organised effort from governments, institutional investors, specialist energy fund managers, banks and energy companies.”

Many institutional investors agree, with the latest Octopus report find that almost a third of those surveyed think the pandemic has made the fight against climate change more urgent. A similar number also believe that the crisis will speed up the implementation of decarbonisation policies.

'The coronavirus pandemic has had a surprisingly positive effect on the environment. In early 2020, we saw carbon emissions decreasing as factories shut down, fewer planes took off, and more people worked from home, keeping cars off the road. The demand for energy fell, along with oil prices. And for the first time, Europe generated more electricity from renewable sources than from fossil fuels,' a statement from Octopus Renewables says.

Furthermore, governments are now being challenged to make the most of these short-term environmental gains by putting climate change measures at the centre of their COVID-19 recovery plans. 

“There is now a huge opportunity for governments everywhere to implement measures that not only help economies recover post the pandemic, but create an environment that encourages further, and greater, investment into renewables at the same time,” adds Matt Setchell, co-head of Octopus Renewables. “It is crucial they do.”

Several governments have done so, with the UK’s Build Back Greener plan aiming to make the country a leader in wind energy, while the EU’s recovery proposal – Next Generation EU – commits to investing 30 percent of its funds into sustainable, low-carbon technologies.

‘Encouraged by public demand and government measures, our report shows 80% of institutional investors surveyed [KF6] plan to increase investment in renewable energy over the next few years. This proves investors are still interested in clean energy assets like wind and solar farms, making sure the money they invest has a positive impact,’ the Octopus Renewables statement says.

At the same time, many investors are looking to move money out of fossil fuels. The previous year’s report focused on divestment from oil and gas, highlighting this strategy as investors’ main push towards a cleaner energy future. 

‘In the face of Covid-19 uncertainties, the speed of divestment has slowed in comparison to last year’s plans. But institutional investors are still moving money away from fossil fuels, showing momentum has slowed rather than stopped,’ the statement continues.

However, while institutional investors are looking to invest more in renewable energy, there are still barriers in the way of these plans. The first of these concerns is the lack of liquidity involved with renewable energy investments. Once invested in wind or solar farms, money is usually locked up for a set amount of time. Double the number of investors see this as a big challenge for them, in comparison to last year’s report. This is likely down to doubt caused by coronavirus.

Investors would also like to see more joined-up international policies to fight climate change and are worried that if this doesn’t happen, it will become harder to push for innovation in the renewable space.

Ultimately, the report states that although COVID-19 has made institutional investors cautious while moving investment away from fossil fuels, it can also act as a catalyst for more investment in renewable energy. 

‘Governments must put lowering carbon emissions at the centre of their COVID-19 recovery plans, creating the opportunity for trillions of dollars of investment from institutional investors. With this injection of funding, renewable energy assets have the potential to help keep global temperatures down, bringing us closer to success in the fight against climate change,’ the statement concludes.

Octopus Renewables statement
Energy Digital magazine