News Briefing: Coronavirus Hits Cleantech Investments Too — But a Few Bright Spots Emerge

This year was to be a very good one for investments in cleantech, renewable energy, and other sustainable investments. But the coronavirus pandemic has changed all that.

Back in October, the International Energy Agency had forecast 2020 to be a record year for new generation capacity from solar, wind and other clean energy sources. Now, though, the IEA is reviewing that forecast amid a warning that the outbreak will likely undermine clean energy investment. The group is urging governments around the world to include funding and subsidies for clean energy in their economic stimulus packages.

A few governments are taking steps to ensure no loss of momentum in the transition to a low-carbon economy, including New York, Virginia and the European Union (see detail on new policy drivers below.)

Still, the US cleantech sector is already showing signs of a sharp slowdown. The sector lost more than 100,000 jobs in March, including solar panel installers, electric vehicle factory workers and construction workers who retrofit homes and offices for energy efficiency. The job loss estimate is based on an analysis of Department of Labor statistics.

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That’s just a fraction of the millions of Americans who have lost their jobs in the pandemic. But it is nevertheless a big blow to a still-nascent sector that had been enjoying job growth of more than 10% a year for the past five years.

Beyond job losses, the pandemic is also disrupting supply chains, which has caused disruptions at cleantech factories and installation sites around the world. Experts say it’s still too soon to say what the full impact of the outbreak will be on the sector. But one estimate from Wood Mackenzie says electric vehicle sales globally will drop 43% this year, from 2.2 million in 2019 to just 1.3 million by the end of 2020.

Still, there are pockets of cleantech activity and sign of hope even as the US and nations around the world struggle to contain the virus and debate when to lift lockdown measures.

Among the recent activity, the New York state government, as part of budget legislation for the upcoming fiscal year, is implementing laws that it says will “dramatically speed up the siting and construction of clean energy projects,” with the intent to fight climate change as well as “jumpstart the state’s economic recovery” from the pandemic.

Features include the creation of an “Office of Renewable Energy Siting,” which will make it easier and more efficient for renewable energy developers to get approval for new projects. The legislation also directs the New York State Energy Research and Development Authority (NYSERDA) to oversee a “Clean Energy Resources Development and Incentives Program” that should also accelerate clean energy projects statewide.

Virginia, meanwhile, is now the first state in the South to require electric utilities to generate electricity from 100% renewable energy. Five other states, plus Puerto Rico and Washington DC, have mandated such a transition. Virginia’s carbon-free deadline is 2050.

The state also has enacted a moratorium on new fossil fuel plants; it’s scheduled to last until 2022 but could be extended. Virginia has also set aggressive targets for utilities to help consumers become more energy efficient.

Over in Europe, the European Commission this month launched a program to get input on a Renewed Sustainable Finance Strategy,which it hopes to publish later this year. The goal is to encourage private investment in sustainable projects, which is crucial to the European Union’s goal to be carbon-neutral by 2050.

In other recent cleantech and sustainable finance news:

Inst’l Investors Develop Climate Action Plans: Leading pension funds and other institutional investors are embracing low-carbon investment strategies, corporate engagement and policy advocacy as integral parts of their climate action plans. The nonprofit Ceres has published a host of case studies of how many such investors from around the world are developing such plans, as part of the group’s Portfolio Climate Risk Management program.

The profiles, which are available on Ceres’ website, detail each investor’s unique approach to climate risk, with details on asset allocations, shareholder engagement programs, approach to ESG disclosure issues, and interaction with asset managers.  Participating investors include Wespath Investments and Benefits, Caisse des Depots et Placement du Québec, AP2, Brunel Pension Partnership and the Ontario Teachers’ Pension Plan.

To take advantage of investment opportunities in climate solutions, Ontario Teachers created “a variety of different investment platforms,” said Deborah Ng, director of strategy and risk and head of responsible investing,  on a recent Ceres webinar discussing the profiles. The renewables platform started with 19 projects across wind, solar and hydro. “We just let that  portfolio grow, and it now has about 87 assets across a wide range of countries,” she said.

The pension also has a C$30 billion real estate portfolio, with direct operational control over many of its properties, Ng said. The pension has worked to get LEED certification (or the equivalent) for nearly all of those properties. “We’re also active in setting annual and long term targets on things like efficiency, water, waste, et cetera,” she said.

Total Invests Almost $500M in Indian Green Power JV: Total is investing more than 37 billion rupees ($487 million) to create a renewable energy joint venture with Adani Group. The French energy giant is teaming up with the Indian conglomerate’s Adani Green Energy unit.

Private companies have been bidding on projects to build renewable generation plans across India and sell the power, and both startups and huge conglomerates have been boosting their investment in the country’s clean energy sector. That’s likely to continue, making India an attractive target for foreign companies like Total.

India had 86 GW of renewable energy capacity as of November; the government wants to double that to 175 GW by 2022 and to 450 GW over the long term.

China Gets $300M to Develop Green Agriculture: China has received a $300 million loan from the World Bank to foster greener agricultural practices in the central province of Henan.

The program is intended to “support the development of a green agriculture financing mechanism that can leverage commercial investments and boost the adoption of innovative technologies,” says Martin Raiser, World Bank country director for China. It’s hoped that the loan will “help China fill the gap in green financing standards and generate useful lessons for other parts of China and increase the quality and safety of agricultural food products.”

Green finance for agriculture is low across China, because banks generally see agriculture investments as having high risks and low returns. The country’s agriculture sector comprises about 14% of all agriculture-related greenhouse gas emissions worldwide.

Real Estate Developer Gets $280M in Green Loans: Singapore-based CapitaLand, one of the largest real estate firms in Asia, has received a pair of green loans worth S$400 million ($US281 million) that it will use for developing and acquiring certified green buildings in its portfolio.

Among other green goals, CapitaLand wants its properties to get at least 20% of their energy from renewables by 2025. The firms’ offices in Singapore will be 100% renewable-powered by the end of the year.

The green loans came from HSBC and DBS.

Asia continues to be a hotspot for sustainable debt. Some other recent examples include Link Asset Management of Hong Kong, which received a $122 million ESG-linked loan from DBS. Terms of the five-year loan will encourage sustainable practices by offering interest rate cuts if certain criteria are met. And LYS Energy Group, an independent solar power producer based in Singapore, received a S$14 million ($9.8 million) green loan from United Overseas Bank. LYS will use the money to expand in the commercial and industrial sectors across Southeast Asia.

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