San Lie: Energy transition waits not for policy, but for investors
This column was originally written in Dutch. This is an English translation.
By San Lie, Director of ASN Impact Investors
As an impact investor, should you let negative news around climate and climate policy throw you off balance? Perhaps if you read the front pages of the newspaper, or follow the reports about the COP29 climate summit in Baku. But closer to home, I also see levees of opportunity in the form of the energy transition. That is now entering a phase where local investors can contribute to a liveable world.
Of course, I orient myself to all developments relevant to our profession as asset managers, from geopolitics to national and European policies. But as much as you might get pessimistic about recent reports, they are not always relevant to the sustainable steps we are taking in the real world. A good example of a fairly autonomous trend that seems unstoppable by political squabbling is the energy transition. Indeed, it is thundering along.
Transition in a new phase
In the Netherlands, the advance of clean energy sources such as sun and wind is so far advanced that the sustainable transition is entering a new phase. Together with the electrification of our transport and industry, the supply of clean energy necessitates a thorough overhaul of our energy system.
You know the story: the peaks and troughs in power supply and demand create an imbalance, resulting in grid congestion and localised scarcity of power connections. That leads here and now to very concrete, local projects that allow investors to make good, predictable and sustainable returns.
Capital for proven technology
A business park where no one can expand has nothing to do with international treaties. That wants that smart energy storage now, the energy management system that makes the most of power connections, or that car park covered with solar panels to run machinery. I cannot outline it more concretely and urgently. These are the local, urgent business cases of which there are countless waiting for investors to help finance the scaling-up of proven technology in local projects.
Zooming out again: the climate mission for the Netherlands and the world is crystal clear: in 2050, we need to go to net zero, and this fact will be increasingly prominent in the way investors look at the quality and risks of their portfolios and the companies and projects in them. A sensible conclusion: more capital needs to flow into solutions needed to achieve net zero.
Local investment in new energy system
Over the past decade, a lot of institutional and public money has been invested in large-scale renewable energy capacity. But the energy transition does not stop with sufficient supply of clean electricity. The next step towards a society independent of fossil fuels requires investments in how we use electricity and other energy. That is the next, second phase of the energy transition.
A phase in which the Netherlands moves further from ‘fossil central’ - via large-scale wind and solar farms - to a sustainable and decentralised energy system requires local investments; in energy generation, distribution and storage, and all new ways of using energy in mobility, production and the built environment.
Tens of billions in opportunities
That transition of our local energy system will require tens of billions in the coming period.
Are these costs? No, for forward-looking investors they are investment opportunities. Opportunities that will continue to emerge in the coming years regardless of the political turmoil. You can mitigate the financial risks associated with climate change while realising the benefits of the energy transition. And besides, we get a livable world in return.
San Lie is a director of ASN Impact Investors. The information in this column is not intended as professional investment advice or a recommendation to make certain investments.