Renewables and the recovery:

Accelerating investment in a post-pandemic world

An introduction to our latest institutional report:

Octopus co-founder, Chris Hulatt, and Alex Brierley, co-head Octopus Renewables, discuss the key findings from the report. Together, they share their thoughts on what’s surprising, interesting and challenging about the findings.

Allocations to renewable energy to rise

The global pandemic is a health and economic crisis of an unprecedented scale. It has changed the way society lives, the way businesses operate and has forced governments across the world to act fast. Yet longer-term, climate change poses a potentially greater threat if society, businesses and governments fail in their efforts to keep average global temperatures below 2°C.

While overall energy consumption fell during lockdown, renewables proved to be a resilient way of producing power. This year, for the first time, Europe has been generating more electricity from renewable sources than from fossil fuel.1

Our survey highlights that institutional investors’ appetite for renewables remains strong. Investors expect to increase allocations to renewable energy infrastructure amounting to $742.5bn in the next 10 years.

Pandemic impacts the pace of change

The pandemic has had an impact on current allocation levels, which have reduced slightly to 4.2% this year, from 4.6% in 2019. This is expected to be a temporary position with investors forecasting allocations increasing to 5.7% next year. Renewable energy infrastructure, particularly wind and solar, is set to be the beneficiary of this increased demand. On a regional level, Europe is the most popular among investors.

Our report shows that Covid-19, and the uncertainty and challenges it has brought, has resulted in investors reappraising their forecasts for fossil fuel divestment levels. While investors anticipate increasing divestment over the next one, five and 10 years, they will do so at a slower pace than anticipated in 2019. As for 2020, institutional investors have reduced the proportion of their overall portfolio divested from fossil fuels, on average, to 4.5% compared to 5.7% in 2019.

International collaboration is key to success

Many investors believe that unless governments start to work together the pace of energy transition could be held back. More than two-thirds of global investors (68%) say a lack of international cooperation is the number one factor negatively impacting energy transition. But the report finds a strong correlation between levels of investment and levels of government action.

Many national governments, such as the UK, have been hugely influential in helping the renewable energy market grow. All governments must now view climate change as a global issue that can only be solved by global coordination.

Collective action taken today will mitigate a far more chaotic and expensive mitigation plan in the future. 

1 (Ember)

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Chris Hulatt - Founder Octopus Group
Mark Williams - Co-Head of Institutional Funds
Penny Chedzey - Institutional Funds Analyst
Semi Kim - Institutional Funds Investor Relationship Manager (Korea)
Jason Bermont-Penn - Institutional Funds Distribution Associate
Institutional Funds Distribution Manager