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Renewable Surge: Aligning Investments for a Greener Future

Renewable Surge: Aligning Investments for a Greener Future

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Download our 2023 Responsible Investment Report

In the midst of our daily lives, climate change can often feel distant and elusive, however, 2023 proved climate change is undeniably real, with its impact alarmingly deadly. From wildfires ravaging woodlands from Greece to Canada, heatwaves sweeping across continents, flooding in India, Cameroon and Libya, the list goes on, climate change impacts the lives of millions. In fact, 2023 was the warmest ever year on record (according to data records dating back to 1850). The chilling realisation (pardon the pun) that such events are selfinflicted by humanity is difficult to bear, but is there time to reverse this course?

The evidence is clear that the consequences of climate change are unfolding faster than we may appreciate, and we should not be naive as to assume that any impact is beyond our investment time horizon. Aside from the aforementioned real and disastrous physical impacts, the financial impact is also becoming apparent and may bite sooner than many may have anticipated. A warmer climate leads to lower productivity and raises inflation. During the year, India banned its rice exports due to drought fears, causing prices to rise to new highs and cause turmoil in the global food markets. According to Absolute Strategy Research (ASR), climate impacts could lower annual global GDP growth by 30 - 40 basis points and raise inflation by around the same amount each year over the next decade. High temperatures would directly impact agriculture, construction, and the infrastructure sectors.

The urgency to address climate change is clear, not only for the preservation of our environment and ecosystems, but also for safeguarding our economies and societies from the far-reaching consequences it poses. Enter the 2023 UN Climate Change Conference, or COP28, in December 2023 - a gathering that echoed this very sentiment. For the first time ever, the role of fossil fuel emissions was recognised as a driver of rising temperatures. It marked a groundbreaking milestone: countries came together, acknowledging the need to “transition away from fossil fuels in energy systems,” representing the most significant leap forward on climate action since the Paris Agreement in 2015. The agreement includes global targets to triple the capacity of renewable energy like wind and solar power, and to double the rate of energy efficiency improvements, both by 2030, a commitment deemed “vital to keep the 1.5°C goal within reach” by the International Energy Agency (IEA).

In a positive turn of events, renewable energy has gained significant momentum in recent years. By 2022, solar generation had surged to five times its 2015 levels, while wind generation had increased by two-and-a-half times. Looking ahead, the RMI, a US research organisation, projects that by 2030, wind and solar could collectively supply over a third of all electricity, an encouraging increase from the current 12%.

Renewables are increasing rapidly

Recent and projected total global capacity, gigawatts

Source: International Energy Agency *Projected capacity is for 2022 - 2027 and is the International Energy Agency’s accelerated case. Other renewables include hydropower and bioenergy.

At Nedgroup Investments, we are proud to say our Sustainable portfolios are actively contributing to this global movement. We are directly invested in a diversified range of environmental infrastructure projects that contribute towards a net zero carbon future. This includes The Renewables Infrastructure Group (TRIG) which predominantly consists of operational wind farms, solar parks and battery storage projects in the UK and Europe. In 2022, they generated 5.4TWh of clean energy, an amount sufficient to power the equivalent of 1.6 million homes annually. To put this into perspective, it equals the energy required to power all the homes in Wales for over a year, and it is the amount of energy needed to drive an electric car around the world over 700,000 times. Thanks to the clean energy generated, the portfolio also avoided 1.9 million tonnes of carbon emissions, that’s equal to eliminating the use of over 900,000 tonnes of coal or avoiding emissions equivalent to over six million passengers flying from London to New York.

Another environmental infrastructure investment fund that we are supporting is the JLEN Environmental Assets Group (JLEN). This is a diversified portfolio of wind farms, waste management and bioenergy, anaerobic digestion, solar and hydro plants, as well as exposure to energy storage - which is critical for efficiently and cheaply storing clean energy for round-the-clock use. All these assets support the drive towards decarbonisation, resource efficiency and environmental sustainability. In addition, JLEN is a big advocate of the United Nations 17 Sustainable Development Goals (UN SDGs). To be achieved by 2030, the UN SDGs recognise that ending poverty must go hand in hand with strategies that build economic growth and address a range of social needs including education, health, social protection and job opportunities, while tackling climate change and environmental challenges.

The table below shows JLEN’s 2022/23 portfolio performance against the UN SDGs: