Responsible Investing

Author:Mr Rubayet Choudhury
Profession:DLA Piper

In brief

There is a relentless momentum for investors of all types to include responsible investments as part of their diversified and balanced portfolio. Renewable energy provides a ready-made opportunity to satisfy such an appetite, and with this market growing, there are a number of fascinating key trends and opportunities developing across the globe.

If you have been to an energy or infrastructure conference recently, it's likely that you have been struck by the amount of exposure given to environmental, social and governance (ESG) issues. There has been a dramatic increase in the number of investors who are visibly taking into account the ethical and sustainability considerations that underpin their investments and terms such as responsible investing and ESG have become buzzwords for investors of all types.

What's in it for investors?

Committing to ESG criteria and ensuring long-term returns are not mutually exclusive. Investment bank UBS has commented that sustainable investment returns are comparable to conventional ones. ESG criteria can be helpful in identifying additional long-term risks associated with an investment. For example, climate change was identified as one of the key macro risks to portfolios globally in a 2019 PWC survey. Investments in areas with negative environmental impact may suffer from regulatory interventions or the costs associated with environmental damage. Being associated with the violation of social or governance issues may lead to considerable reputational damage. Investors are experiencing a stronger demand for ethical investments, particularly from so-called Millennials. By investing responsibly, investors do not just want to be good, they are targeting sustainable long-term returns, reducing risks for their core business and improving their public reputation.

Responsible investing and renewable energy

Renewable projects not only fulfill the relevant ESG criteria but they can also provide long-term stable returns. Moreover, as the technology becomes more and more reliable and the cost of renewable projects continues to decrease, they can be cheaper than conventional power generation, as demonstrated by a number of trailblazing projects in the Nordics.

In this article, we look at some of the key emerging trends for renewable projects and potential investment opportunities.

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