Market shift away from fossil fuels creates greater opportunities for renewable energy and cleantech companies

Posted: 08/10/2015

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The Governor of the Bank of England, Mark Carney has said that the world is changing, and whether you are a "sceptic or an evangelist" on global warming, governments and investors should be aware of the possible effects on financial stability. 

Climate change is predicted to affect the following industries: 

• the insurance industry as extreme weather conditions become more commonplace
• banking, as billions of pounds of loans to energy companies are made
• oil, gas and mining businesses which might have to be re-assessed as new rules on carbon emissions have an impact upon those sectors. 

Citigroup’s announcement that it will cut lending to coal mining companies as a result of the “tremendous” challenge to tackling climate change is evidence that a shift in the market is already becoming apparent. This follows a similar move by Bank of America earlier this year.  

Mark Carney has said that "the challenge is that if there is not action today or in the near future the risk in the medium term goes up and up and requires sharper action, more abrupt action, and a bigger hit to the economy and financial stability". 

In the meantime, Amber Rudd MP, the Secretary for Energy and Climate Change, has also said that “moving to a low carbon economy is key to our long term economic and environmental prosperity.” But, as she has stressed repeatedly since the election, “this government’s policy is to do so in the most cost-effective way possible”. This has been shown in the shakeup of the popular feed-in tariff scheme which Ms Rudd maintains is reflective of the fact that costs have fallen in the renewables industry and that it has become easier for the sector to survive without subsidies.  

The message is clear, from both the government and the banks, that there is a trend of divestment when it comes to fossil fuels leaving space in the market for renewable energy and cleantech companies to thrive. 

Penningtons Manches has a wide range of experience in the renewable energy and cleantech sectors, with recent work ranging from recycling, waste treatment and anaerobic digestion plants, to wind, solar and marine energy projects.  

Depending upon the project, we configure teams to provide advice on all aspects from project finance, corporate issues and investment (including M & A, joint venture structures and venture capital) to environmental and real estate aspects, planning and construction. 

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