(Credit: Pixabay)Investors are highly focused on renewable energy efforts when it comes to net zero and ESG targets, see opportunities to invest in low carbon initiatives in North America and Europe, and feel they need to become regulatory experts, according to a survey from Jefferies.
The survey asked investors about net zero plans as well as environmental, social and governance (ESG) goals. In addition to renewable energy, climate is their main focus regarding ESG and they also are concerned with ESG regulation of capital markets.
Jefferies says in terms of the results, there could be investment opportunities regarding renewable energy in carbon-intensive industries such as oil and gas, mining and steel. Investment in emerging economies when it comes to carbon reduction also has potential, according to Jefferies, since that focus has largely been on North America and Europe.
Wind and solar gain the most attention of investors in terms of renewable energy, with nearly 35% saying the greatest opportunities exist over the next year. Nearly 20% also mentioned energy storage. The Energy Information Agency expects more than half of electricity produced in 2022 in the United States to be from solar sources, with an increasing focus on battery storage.
Carbon capture and direct air capture also have intrigued many investors, despite a lack of commercial scalability, according to Jefferies. Green hydrogen, which is gaining ground as a clean energy source, only registered with about 5% of investors in the survey.
With regulation in ESG and net zero targets increasing, investors say they need to be more on top of the rules, especially in North America and Europe. Jefferies says they continue to grapple with climate information such as Sustainable Finance Disclosure Regulation as well as capital climate disclosures from the Securities and Exchange Commission.
As a result, nearly 70% say regulation of capital markets is an important focus. Most of the remaining responses were geared toward capital trade schemes, such as emissions in Europe, and industry specific standards, such as those regarding renewable energy.
Investors also see the Sustainability Accounting Standards Board as their primary framework, especially in North America. They also are content with the Taskforce on Climate-related Financial Disclosures. This, according to Jefferies, means there is no need to seek new frameworks, although corporations do need begin to disclose their efforts properly.
Climate mitigation strategies were the biggest area of focus when it comes to ESG, with 41% responding that way. Next was engagement on net zero targets.
In terms of investing in net zero, 80% of the investors say there is opportunity in North America and Europe. Asia followed with 16% of investors saying there is opportunity there, with 4% mentioning Africa.
The survey found nearly three-quarters of investors see their companies’ net zero targets as more detailed than ever. Now, Jefferies says, as targets improve, investor analysis will need to begin to focus on the credibility of the efforts.
