How ESG funds have been impacted by energy price rises

ESG Clarity asks fund managers, including Richard Lum, co-CIO at Victory Hill Capital Advisors, about their portfolio adjustments and exposure to renewables

How have rising energy prices impacted investor appetite towards renewables? ​

More astute investors understand that the need for investment to create a sustainable energy system is more all-encompassing and pressing than the need to purely invest in renewable technology in order to obviate the need for conventional fossil fuel energy. In particular, there is a key need for renewable technologies to overcome their intermittency issues (such as longer duration storage projects and enabling biomethane to be used in a negative zero context) to allow for dependable power on the grid.

Is increased interest in renewables infrastructure making it hard to find attractive deals?

There is no shortage of renewable products coming to the market seeking ever-cheaper sources of capital, and this has attracted inflows from large institutional investors seeking risk-adjusted yields over the long term as a proxy for bond yields. However, the energy transition to net zero, and energy sustainability is a global phenomenon and not simply a western European one as perceived by many first-world investors. To make a true impact in the global sustainable energy agenda, requires investment in renewables and conventional energy infrastructure in developing as well as developed economies.

How have rising energy prices affected the trajectory towards net zero?

Rising energy prices driven by the current uncertainty around Russian sources of energy will inevitably precipitate a greater focus on ensuring the overall resilience and security of supply in the UK and Western European energy grids. In particular, this will dovetail substantially with the transition to net zero, and as such the shift will incorporate movements to alternative sources of transition fuels (ie natural gas from other supply sources in particular) as well as renewable power generation.


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