How is the Investment Landscape in Renewables Changing?

Whether motivated by impact investing principles, accounting for ESG factors, or just plain dollars and cents, investors are putting money into renewable energy development more than ever.

(Source: UNEP/Bloomberg New Energy Finance)

 

According to the Global Trends in Renewable Energy Investment 2016 report from Bloomberg New Energy Finance and the UN Environment Program, 2015 saw a record $285.9 billion invested in renewable energy, including investments in new renewables capacity, venture capital investments, and mergers and acquisitions. This represents an overall increase of 5% over 2014, more than six times the amount invested in 2004, and a cumulative total of nearly $2.3 trillion over the past 12 years!  For the first time ever, investments were greater in developing countries than developed countries, led by China’s investment of $102.9 billion – over a third of the global total – while investments in the U.S. also jumped nearly 20% to $44.1 billion.

(Source: UNEP/Bloomberg New Energy Finance)

 

A large majority of these investments, $265.8 billion, came from investments in new renewable power generating capacity around the world, more than double the amount invested in new coal and gas generation. Of this total, nearly $200 billion came from utility scale installations, and an impressive $67.4 billion was invested in distributed and rooftop solar capacity. Technology-wise, the biggest sectors by far were wind energy, at $110 billion, and solar energy, with a whopping $161 billion invested representing annual growth of 12% - more than any other technology!

Carbon Pricing and Carbon Disclosure

Despite this momentum for renewables, we’re still a long way from achieving the kind of large-scale clean energy transition we need to preserve our climate for future generations. So, while policies like renewable portfolio standards (RPS), net metering, and tax credits have played a major role in jump-starting investments in renewables, there is a growing movement to put in place more comprehensive policies to “put a price on carbon” – in other words, to force companies that burn and sell fossil fuels to pay for the carbon dioxide they emit. Carbon pricing would encourage even more investments in the zero-carbon renewables of today as well as research into next-generation technologies that we’ll need to achieve longer term climate goals.

This goal can be accomplished with two different types of policies: a carbon tax, which directly taxes the carbon content of fossil fuels, or a cap-and-trade system, which puts a cap on the amount of carbon emissions and allows companies to buy and sell permits to produce (and reduce) these emissions. In essence, a carbon tax sets a price on emissions and lets the market decide how much to pollute, whereas a cap-and-trade system sets the amount of pollution and lets the market determine the price of emissions. Either policy can be effective, and a growing chorus of environmental groups, businesses, political leaders, and international finance organizations have come out in support of carbon pricing as a way to accelerate the clean energy transition in a way that makes economic sense for investors.

Given this momentum – as well as the existential threat to the global economy posed by climate change – savvy investors and businesses aren’t waiting for policies to be enacted to start factoring in a carbon price in their decision-making. As part of the broader movement towards ESG (Environment, Social, and Governance) investing, a growing number of investors are demanding that companies disclose their carbon emissions and factor these into their financial reporting. The Climate Disclosure Project (CDP) has signed up 827 investors representing $100 trillion to demand corporate disclosure of carbon emissions, and over 1,000 companies around the world have pledged to use an internal price on their carbon emissions.

 

Invest in Your Own Renewable Energy With Mosaic

Over $60 billion was invested in distributed renewable energy generation last year – which includes millions of homeowners around the world going solar. Mosaic makes it easy to invest in your own clean energy future by connecting you with zero money down financing and the best solar installation companies in your area. Click here to get started with a free quote to see just how good of an investment going solar can be!

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