Renewable Transition

Talking Up Green Finance

ARCHIV - Hinter den Photovoltaik-Panelen auf einem Scheunendach dreht sich am 06.05.2013 eine Windkraftanlage. Die Behörden in Brandenburgs Kommunen, Kreisen und der Landesverwaltung sind eigenen Angaben zufolge darauf bedacht, energieschonend und nachhaltig zu wirtschaften. Foto: Roland Weihrauch/dpa (zu lbn «Brandenburgs Behörden setzen auf Nachhaltigkeit» vom 05.09.2015) +++(c) dpa - Bildfunk+++
Getting in on green action.
  • Why it matters

    Why it matters

    Investments in renewable energy are growing, and advocates say the trend will increase in the coming decade.

  • Facts

    Facts

    • World governments last December agreed to curb climate change, promising to keep temperatures from rising more than 1.5 degrees Celsius.
    • By 2030, some $93 trillion will need to be invested in alternative energy projects to meet that climate target.
    • Some 500 organizations and funds around the world have committed $3.5 trillion to “impact investing” so far.
  • Audio

    Audio

  • Pdf

It’s a truly mouthwatering figure. By 2030, around $93 trillion will have to be invested around the world on projects to halt or limit global warming.

That’s how much it will take for governments to keep their promise made in Paris last December to prevent global temperatures from rising more than 1.5 degrees Celsius, according to Jeremy Oppenheim, the head of the Initiative New Climate Economy.

The projects represent a “one-time opportunity” for investors,  Mr. Oppenheim said Monday at the Berlin Investment Forum hosted by the daily newspaper Tagesspiegel, a sister publication of Handelsblatt Global Edition in Berlin.

Mr. Oppenheim is not the only one who’s convinced. An increasing number of investors around the world believe they can earn money and do something good for the climate at the same time.

It’s called “impact investing” or “divesting,” and it means pulling your money out of coal, oil, natural gas or other fossil fuels and investing in “green” instead. Some 500 organizations and funds around the world have committed $3.5 trillion to divestment so far.

“We’re not alone anymore,” said Charly Kleissner, the founder of the KL Felicitas Foundation, which pioneered impact investing in the early part of the last decade. “The next generation is all in.”

The optimism is not shared by everyone, however. Established players say they are wary of putting all of their eggs in the green energy basket.

Many point to Germany’s struggles with a closely-watched transition to renewable energy as a sign that not everything is quite so rosy.

“The war is over...The race is now on to see how big and how fast this thing is going to happen.”

Mike Eckhart, Citigroup

“Germany is super-interesting, but it is not a blueprint,” said Stephan Reimelt, the head of GE Europe.

The trouble isn’t so much the idea as how to get there. While most countries are looking to move towards alternative energy, few have been as aggressive as Germany, which plans to shutter all its nuclear power plans by 2020.

Solar panels and wind energy have taken over in Germany, but Mr. Reimelt noted that investments in renewables had been made worthwhile largely on the back of government subsidies, which many countries can ill afford.

Mike Eckhart, the global head of environmental finance at Citigroup, told Handelsblatt Global Edition that Europe is in something of a “funk” when it comes to renewable energy, as experiments with subsidies and initiatives like feed-in tariffs have distorted the market.

The result is that Germany has a glut of alternative energy, making new investments harder to justify, while established utilities such as E.ON and RWE are struggling to earn a living. Earlier this month, the German government agreed to slow the transition to ease the impact.

At the same time, Mr. Eckhart said the principle of investing in green energy –  even if there may be speed bumps – remains rock solid.

“The war is over,” and renewable energy had won the day, he told the Berlin forum. “The race is now on to see how big and how fast this thing is going to happen.”

Despite the risks, supporters argue there won’t be a better time to join. Jochen Wermuth, a Berlin-based investor and founder of Wermuth Asset Management, said he has stopped investing in fossil fuels and is putting faith in young startups that promise to be resource-efficient.

“We’re in the middle of a great new industrial revolution,” he said, urging other investors to get in while the going remains good.

And for those that don’t like the risk, Armin Sandhövel of Allianz Global Investors said the market has matured enough that there are plenty of established players and technologies in the renewable energy world to invest in.

“Renewable energy is no longer a niche,” said Mr. Sandhövel, head of infrastructure equity at the asset management subsidiary of Germany’s largest insurer Allianz. The market has matured to a point where renewable energy investments are becoming a regular part of portfolios, even of cautious groups like insurance companies, he said.

 

Christopher Cermak is an editor with Handelsblatt Global Edition in Berlin, covering finance and economics. Carla Neuhaus covers economics for Berlin’s Tagesspiegel newspaper. To contact the authors: cermak@handelsblatt.com

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