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Closing the clean investment gap key to preventing climate crisis

clean trillion

Though investment numbers fell in 2013, the clean energy sector is showing several positive trends at the start of 2014. Creative Commons: Harald Prett/Statoil, 2012

New 2013 numbers identify a shortfall in clean energy investment to prevent dangerous climate change. Closing that investment gap, however, is both possible and profitable for financial leaders.

Bloomberg New Energy Finance (BNEF) reports that global investment in clean energy in 2013 fell for the second straight year to $254 billion. The decline in investment is largely due to policy uncertainty and falling prices for clean energy.

In order to ensure a safe, liveable climate future, analysis by the International Energy Agency have revealed that the world must invest a total of $36 trillion in clean energy by 2050 — an average of $1 trillion per year.

This goal, called the ‘clean trillion,’ will require major institutional investors to ratchet up their clean energy commitments. At the high-profile Investor Summit on Climate Risk 2014 on January 15th at the UN, Ceres unveiled its roadmap for achieving the clean trillion, noting that the goal is possible, profitable, and shields institutions from the risks of high-carbon assets in a warming world.

On the declining clean energy investment figures, Michael Liebreich, Founder and Chairman of the Board of BNEF, said in a statement:

The top-line figures don’t tell the whole story.

In a press conference at the Investor Summit on Climate Risk, Liebreich gave his take on the clean energy sector in broader terms, noting that there are several positive trends that indicate the sector’s success.

Clean tech stocks rebounded 70-80% in 2013, with stand-out growth by electric car maker Tesla and solar ETFs. Costs for clean energy are dropping dramatically, fueling growth and accessibility to a greater number and diversity of markets.

Since the beginning of 2011, the average price of a PV panel has dropped by more than 60%, and from 2008 to 2012 the average cost of US wind power decreased by 43%. Installations of clean energy are not on the decline — in fact, global solar installations rose by 20% in 2013 to a new record high. Falling prices also mean that investors are getting more for their money. Green bonds showed extraordinary growth rates, hitting $14 billion last year.

Looking beyond declines in clean energy investment in the US and Europe, Asia (excluding China and India) — especially Japan — is seeing significant growth in clean energy. The market is also growing in geographical diversity, with many new countries from Asia to Latin America opening up their clean energy demand. Lastly, clean energy solutions are quickly disseminating out to a broader market, as, for example, solar options become cheaper than kerosene and diesel fuels for rural electrification.

Climate change poses a systemic threat to the global market by exacerbating resource scarcity, intensifying natural disasters, altering infrastructure needs, and exposing fossil fuel assets to regulatory risk. On the flip side of this looming threat, however, investors at the Summit see an opportunity to capitalize on innovative and emerging clean energy industries.

As the clean energy industry stabilizes and grows, now is the time for investors to lead the way in driving the transition to a clean energy economy. Greenhouse gas emissions are still rising faster than the deployment of clean energy solutions needed to fight climate change.

Investors have a pivotal role to play in promoting the necessary transition from a carbon-intensive to a clean energy economy. Closing the gap and achieving the clean trillion is not only possible, but it is an increasingly profitable opportunity that shields investors from the risks of high-carbon assets in a warming world.

UN climate chief Christiana Figueres reiterated that point, calling on financial institutions to triple their clean energy investment. In a press conference at the Summit, she noted that international and national climate policy is inevitable. It is in the best interest of business and finance to work to bring about that climate policy sooner rather than later to prevent market shocks.

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