• The Ukraine war provides momentum for the energy transition
• Investment professionals identify opportunities and risks
The topic of clean energies has become increasingly important in recent years. In recent weeks, however, the desire for greater independence from fossil fuels has become even more acute in the wake of the Ukraine war. Last but not least, this can also be felt in Germany, where dependence on Russian gas poses major challenges for politicians, the economy and consumers.
In response to Russia’s invasion of Ukraine, the question is how the country can meet its energy needs in the future. The preferred choice here is renewable energies: “I assume that by 2026 we will spend around 200 billion euros on climate protection, charging infrastructure, hydrogen technology, the modernization of industry, and the abolition of the EEG surcharge to relieve people , will be provided for,” said Finance Minister Christian Lindner in a recent interview with the TV program “Report from Berlin”. Economics Minister Robert Habeck also wants to make rapid progress with regard to renewable energies. According to the dpa, Habeck announced that the electricity sector should become climate-neutral by 2035, while this goal had previously been estimated for 2050.
Increased investments in clean energies
In view of this change, it is not surprising that various investment experts see great opportunities in the area of clean tech. According to data from the financial data and software company PitchBook, global venture capital assets that have flowed into the clean energy space have grown to US$43 billion in 2021, compared to just US$20 billion in 2020. as CNBC writes.
Experts speak out at conference on Clean Tech
Various investment professionals recently commented on this trend at CERAWeek, a series of conferences organized by IHS Markit and reported on by CNBC. In it, they exchanged views on the opportunities and risks of this industry for investors during a discussion on the topic “The growing role of financial innovations in the area of climate and clean tech”.
Numerous opportunities for investments
As noted by BeyondNetZero’s Eli Aheto, he believes the space is relatively new and still offers “plenty of room to add more and more capital to this trend.” This “trend” is very broad and includes very different technologies from different industries. Brad Fierstein of Apollo Global Management also sees the money already invested in the area “as a drop in the bucket in view of the extent of the possibilities” for the expansion of clean energies on the one hand and investment opportunities on the other hand, like him the news portal reflects.
The fact that the area around renewable energies and ESG is now attracting more attention than ever before is probably due to the fact that the effects of climate change are now clearly noticeable. According to NGP Energy Technology Partners expert Philip Deutch, this would lead to more and more different investors becoming interested in the area. In addition to venture capitalists and large companies, this now also includes private investors and universities who are trying to capitalize on the trend topic.
However, Farnam Bidgoli, who is responsible for ESG at HSBC, points out that the different investment types would also have different goals. Larger investors, such as institutions, would focus on long-established areas such as e-mobility, wind and solar energy, which in turn would be to the detriment of fledgling areas of the clean tech industry. There are numerous companies whose connection to the clean energy sector may not be so obvious, but which could nevertheless make an important contribution to the fight against climate change, such as companies that develop software for better energy efficiency in buildings: “The technologies are empowering or support, whose story is perhaps a bit more complicated – here we see less appetite among investors,” says Bidgoli.
In the following, the experts gave a concrete insight into the extent to which their own companies would get involved in the field of clean tech. Fierstein, for example, focuses in particular on US offshore wind farms. A lot has already happened in Europe, but this is still “a huge undertaking” in the USA.
Aheto, on the other hand, said he would pick companies that didn’t rely on new technology, but rather on tried and tested ones. In his opinion, the companies should be able to show “a real business model” with “sales and gross margin”.
Vague criteria for ESG investments
A problem that the ESG field is repeatedly confronted with is the fact that the criteria for this are quite vague. The abbreviation stands for Environment, Social, Governance, which in German means environment, social affairs and corporate management. However, what exactly this means for a company and how it is implemented is not always transparent. However, Deutch cautions that at the end of the day, choosing “the most virtuous path” might not even matter, since “we are all in the same boat” at the end of the day. In the area of ESG, the question arises again and again as to whether traditional energy companies, including those that focus on oil or gas, should be included or should be removed from an ESG portfolio. According to Bidgoli, however, such an exclusion is ultimately not expedient, since these companies would also have to make their contribution to decarbonization.
High valuations, future regulation and supply chain issues raise eyebrows
In addition to this aspect, another risk in the emerging clean tech area would be the high valuations that some of the companies included in it already had. In addition, the future regulation of renewable energies is also a question mark for many investors: “What investors need is stability and predictable politics. If you want private capital to enter an area and support it, then you shouldn’t change the rules,” advises therefore Fierstein. Another problem that the energy sector is currently facing are supply chain difficulties. This would hit young companies even harder than long-established companies, which would only have limited income and cash reserves.
Ultimately, every investor has to decide for themselves whether the clean tech sector is worth investing in. In any case, Apollo expert Fierstein is certain that there are now “more opportunities to invest in the energy transition and climate protection”.
Editorial office finanzen.net
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