Over the last 5 years, the concept of operational sustainability and the future of a net zero economy has shifted as a priority across the private sector. A decade ago, sustainability was often viewed as an impact-based initiative for those with the available capital to invest in such a luxury. It was mostly leveraged by big names that could invest in a campaign that would appeal to partners and consumers who valued environmental action. In many cases, it was a branding exercise, targeting those who would be more likely to spend money or do business with an organization who could point to material efforts to operate more sustainably. This was true both for company-based internal sustainability initiatives and sustainably driven investment strategies. For the majority of businesses, the intrigue of sustainable practices – and distributed energy technologies – came not solely from greening operations, but rather from the monetary value that could be achieved by taking advantage of programs, subsidies, and cost-reduction mechanisms. Because of this, public organizations put varying levels of importance on sustainable operations. Socially responsible investments were certainly happening, but not on a widespread, mainstream scale.
Now, impact investing has the potential to dramatically transform the energy sector as we know it. Monetary confidence in solutions that promote the decarbonization of our planet can catalyze change and democratize clean energy technologies.
Over the last year, signs in the market are showing dramatic changes in Environmental, Social, and Corporate Governance (ESG) and Socially Responsible Investing (SRI). Leading investment firms like Blackrock and Morgan Stanley have put out statements regarding the future of ESG investing and offer strategic recommendations for those considering impact investing. With commitments from these major players, all signs indicate that sustainable investment solutions are not just turning mainstream, but will be a fundamental component of portfolios going forward. In addition to marking sustainable investments as an integral part of the future, both Blackrock and Morgan Stanley have made their own commitments and taken material action that supports their confidence in this area.
According to Morgan Stanley’s analysts, capital flows into ESG funds were up 102% at the end of 2020, and are projected to sustain growth through 2021. In 2020, Blackrock surveyed a sample of clients to gather market feedback on the impact of sustainability in practical settings. The resulting report stated that 54% of respondents said sustainable investing was a critical part of their evolving investment strategy. Both organizations agree that in order to have a true impact on global decarbonization initiatives, there must be an injection of private capital into those institutions and innovative solutions that will combat our climate crisis.
So what does this mean for the distributed energy sector?
In our experience, we are seeing momentum cascade to project development and across the industry through innovative strategy, entrepreneurial commitment and increased R&D. ESG investment is an indicator of other positive trends in the industry, influencing project finance, customer financial projections, VC investment, and technology commercialization. There continues to be an underlying conflict between traditional concepts of power and disruptive new approaches. However, investment trends illuminate future scenarios where sustainable practices, clean energy technologies, and planet-driven behaviors establish themselves as the norm.
Still, there is work to be done. Impact business cannot require a financial or operational sacrifice if we are to achieve widespread adoption. Sustainable practices cannot be limited to those organizations that have the economic surplus to implement them. Capital injected through meaningful investments needs to move the broader market to make technologies more affordable and practices more mainstream.
Here at GridMarket, we are using data and disruptive business models to accelerate projects on the ground. Momentum in the investment sector directly translates to business success, and we are excited to see the industry experience such exciting and meaningful growth.