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The Renewables Ramp-Up

The demand for fossil-free products is increasing. Framed by low oil prices and the impending COP21 Conference, the movement for alternative energy is gaining momentum.

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Leonardo di Caprio has promised to pull his money out of fossil fuel companies. He’s not alone. He pledged to make the change along with over 2,000 other people and 400 institutions at the latest divestment movement meeting.

This is a global campaign that began in 2011 and has seen the likes of the Rockefeller Brothers Fund, obtained through oil fortunes, Harvard, the Australia National University, Glasgow, and The Guardian drop their fossil fuel holdings and increase their stakes in renewable energy companies. The Pope issued a papal pronouncement in June demanding swift action to save the planet and the Church of England’s started taking assets out of traditional energy companies. It has the backing of a diverse range of people like Naomi Klein, Ed Davey, Prof Anne Glover, Tilda Swinton and Yotam Ottolenghi who believe this is a key step forward in tackling climate change. It’s estimated the movement has increased 50-fold in one year.

There are some critics who argue the movement is fashionable and lacks evidence, saying it hasn’t been specified exactly how much of the $2.6 trillion in overall assets it claims to have divested were ever actually invested in fossil fuels in the first place.

Nonetheless, fashion is hard to argue with (how many of us haven’t had a beard in the last 12 months?) and the movement is having some impact on fossil fuel companies. The power plant owner NRG told The New York Times that he was mindful of it when NRG announced plans last year to cut carbon emissions by 90%. It’s gone even further this year and committed to reducing GHG emissions in align with Science Based Targets, an amount determined through formulas designed to prevent warming of the globe going above two degrees.

Thomas Van Dyck, managing director of SRI Wealth Management Group said the research showed a growing number of investors wanted to reduce their carbon risk and switch their money into clean-growth industries. That underscores what I see every day as a financial advisor – that the demand for fossil-free investment products is increasing,” he said in a statement.

The one bit of good news about the the falling oil price is that investors are being presented with more attractive renewable opportunities. The newly established Menhaden Capital, a London-based investment trust headed by Ben Goldsmith, is one example. It targets clean energy related businesses – hydro, solar and wind – through backing from a range of people including Easyjet founder Stelios Jali-Ioannou and Belgian hedge fund manager Pierre Lagrange, although it is the support of the Italian insurance giant Assicurazoni Generali that is seen as really having the potential to transform the market. Goldsmith says, “Tilting portfolios for reduced environmental impact. That’s the big trend. Investors doing the right thing by saying, ‘actually, not only is reducing the environmental impact of our portfolio the right thing to do, but it also makes us more money.”

It’s expected that this movement will heat up as we get closer to the COP21 conference in Paris in late November. The UK, which has come under pressure in recent weeks for its perceived lack of commitment to carbon reducing goals as a result of subsidy cuts for renewables, is being targeted by campaigners who recently discovered local authorities have invested £14bn of pension funds into fossil fuels. Danni Pafford from called on councils to take action. “Public investments in fossil fuels are fuelling dangerous climate change and present a threat to the pensions of 4.6m public sector workers. There’s a strong ethical and financial case for local councils to divest from fossil fuels and reinvest into infrastructure fit for the 21st century.”

The British Government has been criticised for the decisions like cutting subsidies for solar power by 87% and an end to support for wind farms. Industry figures say it could result in strangling renewable energy just as it takes off. The proof is in the pudding – with government statistics showing that renewable energy surpassed coal in supplying the UK’s electricity for a whole quarter. Data collected between April and June showed that as a result of more solar panels and wind turbines being installed the amount of energy produced hit 25%, up from 16.4% in the same quarter the year before.

But instead of reinvesting in renewables, the monies went to the nuclear sector with Energy Secretary Amber Rudd announcing a £2bn loan guarantee for the proposed Hinkley Point plant, saying it was “value for money” for low carbon, baseload electricity. Critics have attacked it with one former Tory minister saying it was “one of the worst deals ever” for British consumers and industry.

As Precise recently reported, the UK dropped out of the top ten for the first time in the EY RECAI (Renewable Energy Country Attractiveness Index). At the minute it is still seen as one of Europe’s most attractive places to invest but campaigners say that’s before the impact is felt following the summer budget’s one-two punch on subsidies. With 56% of British businesses who took part in a recent Npower Business Solutions survey saying they had concerns about renewable affordability, the cuts will likely go against bringing in investment to drive technological advances that ultimately reduce the cost.