How COP26 is accelerating clean technology investments.
COP26 has highlighted the worst possible impacts of increasing global temperatures; the push for net-zero emissions has never seemed more crucial. Clean-tech will play a large role but investment has struggled in recent years. Fears over overvaluations this year have seen investment pulled out of the public markets (Chrysoloras, 2021). A decade-long hangover still lasts from the disastrous clean-tech boom where over half of the $25bn invested was lost between 2006-2011 (O’Sullivan, 2016). However, analysts and investors believe this time it is different (McCormick, 2021).
Increased commitments for net-zero around COP26 will lead to this much-needed resurgence in clean-tech investment. An increased reputational risk for ‘dirty’ investments is leading to sustainable funds being more competitive. BofA estimates a third of global equity inflows are now heading to such funds (Chrysoloras, 2021). The fresh wave of clean-tech financing has also seen large increases in venture capital investment. Investment in January 2021 alone was more than the annual 2015 total, according to BloombergNEF. These trends are likely to continue with agencies such as the IEA emphasising the importance of dramatically increasing investment year-on-year.
The recent energy crisis may prove yet another roadblock. It has led some to panic, undermining the commitments of governments to stopping coal production. Indeed, the Chinese government has instructed to “produce as much coal as possible” (Gordon, 2021). However, this crisis may be an opportunity to double-down on renewables - further resurging clean-tech. Whilst Europe’s renewables prices have remained low, EU climate chief Frans Timmermans urged Europe to speed up the energy transition so there can be affordable renewable energy for everyone (Taylor, 2021). Overall, as Goldman Sachs and HSBC highlight, a successful COP26 would set the tone for medium and long-term policy change that will lead to a turnaround and boom in clean-tech investment.
Written by Kishen Singh
Bloomberg New Energy Outlook 2021.
Chrysoloras Nikos. “An Investor’s Guide to Winners and Losers of COP26 Climate Talks”. Bloomberg Green. 27/10/2021. https://www.bloomberg.com/news/articles/2021-10-27/a-stock-investor-s-guide-to-the-cop26-climate-talks-in-glasgow
Gordon Sarah. “Great private investment is essential to tackle the climate crisis”. Financial Times. 01/11/2021.
McCormick Myles. “Urgency over net zero sparks climate tech investment boom”. Financial Times. 01/11/2021.
O’Sullivan Francis. “Venture Capital and Cleantech: The Wrong model for clean energy innovation”. July 2016.
Taylor Kira. “Energy price crunch risks derailing UN climate talks, Iberdrola warns”. EURACTIV.com. 04/10/2021.