EY: UK's appeal renewable energy destination dropped

23 September 2014 Consultancy.uk

According to EY’s latest 'Renewable Energy Country Attractiveness Index', the UK has dropped for the first time since December 2009 to the seventh place, a place that represents the lowest place in five years. Ben Warren, Environmental Finance Leader at EY, states that there is a ‘perfect storm’ of reasons for the drop, including the government’s decision to cut funding ahead of time, and the rise of emerging markets.

The 'Renewable Energy Country Attractiveness Index' (RECAI) is a global publication established in 2003 that is released on a quarterly basis by consulting firm EY. This index ranks 40 countries on the attractiveness of their renewable energy investment and deployment opportunities in the eyes of investors.

The latest edition of the index shows a significant reshuffle at the top, with China back on number one for the first time since May 2013, pushing the US to the second place. “China’s government is placing increased emphasis on cleantech as the country battles pollution, ushering in new market opportunities for foreign investors. Aggressive policy targets, an increased focus on consolidation and the roll-out of pilot carbon emissions trading schemes also support the country’s pollution reduction initiatives and reflect cleantech’s strategic economic value,” says Ben Warren, Environmental Finance Leader at EY.

The RECAI also shows that Europe and Australia are losing ground to emerging markets, with the UK falling to the seventh place, making way for India, and Australia switching places with Brazil, ending up on the 10th place. In the top 5, Germany (#3), Japan (#4) and Canada (#5) manage to hold their grounds. 

Renewable Energy Attractiveness Index

Renewable energy attractiveness of the UK
For the first time since December 2009, the UK has fallen to the seventh place, and reached its lowest point in five years. EY indicates that declining budgets and political apathy have contributed to this. The government has decided to withdraw Renewables Obligation (RO) support for solar projects above 5MW two years ahead of its original plan and, on top of this, the government has already assigned the majority of its funding for renewable energy projects until 2020. The result: a cancelation of offshore projects.

EY states that UK’s position is not only threatened by domestic challenge; intensified competition and new dynamic emerging markets are also threatening UK’s ability to attract investors. India’s push to the sixth place was caused by the development of the new government of long-term energy strategy that galvanises public and private investment in the sector. Other emerging markets in the top 10 that are potential threats to the UK are Brazil and Chile, two countries that are developing robust deployment pipelines and consistent policy support.

Ben Warren - EY

Warren commenting on UK’s future position: “What we are seeing is a ‘perfect storm’ of reasons prompting a fall in the appeal of the UK’s renewables market. To continue to compete for international capital, the UK’s market reform and upcoming Contract for Difference (CfDs) regime will have to go a long way to repair the damage or recent policy mishaps.”

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Private equity firms ramp up sustainability focus

19 April 2019 Consultancy.uk

In line with business leaders across the industrial gamut, private equity firms are increasingly on board with sustainability projects. According to a new study, the investment arms for major funds are implementing a number of strategies aimed at supporting sustainable economic development in line with global goals.

While the business world has finally begun to acknowledge the danger of climate change, effective action plans remain difficult to achieve. The Paris Agreement has stipulated a clear target for the decades leading up to 2100, although massively reducing emissions while not crashing the economy could be a tall order.

Businesses that are able to acquire capital can use it to boost productivity and output, thereby creating a virtuous cycle of development. However, some businesses are better able to utilise resources than others, both in terms of their relative productivity, as well as the value of the respective outcomes relative to costs (including environmental harms). Financing can therefore provide an avenue to select businesses that are aligned with various global sustainability goals, while shunning those that drive little or unsustainable social value creation.

Top moves made by investment arms towards responsible investment

Profit has for the longest time been the central criterion for investment decisions. Yet profit at any cost is increasingly seen as creating considerable social harms, while often delivering only marginal value. As a result, the private equity sector, which was initially sluggish to change its ways with regards to sustainability, has started to see the topic as an opportunity as much as a challenge.

A new study from PwC has explored how far sustainability goals have become part of the wider investment strategy for private equity (PE) firms. The report is based on analysis of a survey of 162 firms and includes responses from 145 general partners and 38 limited partners.

Maturing sustainability

Top-line results show that responsible investment has become an issue for 91% of respondents. For 81% of respondents, ESG (environmental, social, and corporate governance) was a board matter at least once a year, while 60% said that they already have implemented measures to address human rights issues. Two-thirds have identified and prioritised Sustainable Development goals that are relevant to their investment segments.

Change in concern and action on climate-related topics over time

While there is increasing concern around key issues, from human rights protections to environmental and biodiversity protection, the study finds there are mismatches between concern and action. For instance, concern among investment vehicles around climate change has increased since 2016.

In terms of risks to the PE firm itself, concern has increased from 46% of respondents in 2016 to 58% in the latest survey. However, the number who have taken action remains far below those concerned, at 9% in 2016 and 20% in 2019. Given the relatively broader scope of investment opportunities, portfolio companies face higher risks – and more concern – from PE professionals, at 83% in the latest survey. However, action is less than half of those concerned, at 31%.

Changing climate

In terms of the climate footprint of the portfolio companies, 77% of respondents state concern in the latest survey. 28% of respondents are taking action through the implementation of measures to mitigate their concerns.

Concern and action taken on ESG issues

In terms of the more pressing issues for emerging responsible investment or ESG issues, governance concern of portfolio companies comes in at number one (92% of respondents), while 60% have taken action on it. Firms have focused on improving awareness – setting up policies and a range of training modules for their professionals around responsible investment decision making. Cybersecurity takes the number two spot, with 89% concerned and 41% implementing strategies to mitigate risks.

Climate risks take the number three spot in terms of concern for portfolio companies (83%), but falls behind in terms of action (31%). Health and safety track records are a key concern at 80% of businesses, with 49% implementing action. Gender imbalance within PE firms themselves ranks at 78%, which is being dealt with by 31%. A recent survey from Oliver Wyman showed that there is gender balance at 13% of GP teams in developed countries.

Biodiversity is also an increasingly pertinent topic, with risks from pollution and chemical use increasingly driving wider systematic risks around environmental outcomes. It featured at number eight on the ranking of most likely global risks for the coming decade, with its impact at number six. As it stands, biodiversity is noted as an issue at 57% of firms, with 15% implementing action.