Investor view: green energy must be packaged correctly to be attractive to investors

“If we don’t create the clean energy firms that look like firms investors are used to, then we will not see the promised capital.”

The most encouraging aspect of the surprisingly positive recent UN climate change summit in New York was the number of pension funds, insurance companies and others who committed to greater investment in clean energy. But despite the need for capital in low-carbon investment, the conundrum for those investors is where to put their money.

The fact is that clean energy companies of a size to rival the oil, coal and traditional utility companies are few and far between, and even when there are big new clean energy investments to be made, state-owned enterprises dominate. Take the UK, where the first new nuclear power station is to be built by a consortium of French and Chinese state companies. Or dig around in the debt of many large clean energy projects in Europe and you will find an array of state debt guarantees, export credit support and other state banking institutions.

So why is the rhetoric that of a transformation in private sector investment, and the reality an investment universe dominated by state-backed enterprises?

One could surmise that either private investors don’t mean what they say or that state actors are crowding out private sector enthusiasm.

More likely, are two other related reasons.

First, we do not present clean energy investment opportunities in a way the investment community understands and can digest. Buying and selling a coal company’s stock requires a different skill set to structuring the construction of a nuclear or offshore wind power station, for instance. If we don’t create the clean energy companies that look and feel like companies investors are used to, then we will not see the promised movement of capital.

Second, perhaps we never have mobilised private capital into energy infrastructure investment, and this is a first-of-a-kind problem for a sector where the state has historically done it. Perhaps private capital has only ever entered the market at scale to own things already built.

Whatever the reasons, in these austere times, the energy investment challenge seems beyond the state alone, and so we have to rise to the challenge of turning the good words in New York into reality.

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