Global businesses boost clean energy investment amid race to net zero

New research by global law firm Ashurst, Energy Transition Investment: Latest Trends across the G20, found the vast majority of organisations have a strategic goal to move towards net zero emissions.

Almost 70% of respondents said their organisation had already committed to a net zero target, with a further 28% having one under development. Corporate net zero targets are more common among organisations based in Europe (76%) and North America (76%) trailed by other markets including Australasia and the UK.

The research tracks survey responses against Ashurst's 2020 Powering Change: Energy in Transition report and maps changes in attitudes towards renewable power generation and decarbonisation technologies. Based on a survey of 992 senior business leaders involved in energy investment decisions at their organisation, the findings provide an insight into how businesses are managing the transition to clean energy.

The top three strategies for organisations to meet net zero were to reduce their own emissions (listed by 57% of respondents), acquire carbon offsets (48%) and directly invest in renewable energy development projects (48%). Interestingly, only 37% were planning to reduce emissions throughout their supply chains and 19% were setting science-based targets.

A total of 72% of respondents said their strategies had changed in the past year and they expected to continue adapting in response to the energy transition. Another 19% said they had changed their plans but didn’t expect to change them again.

Almost two thirds of organisations plan to fast track their shift from investing in traditional energy sources – such as coal, gas and oil – to renewable energy in the next 12 months. Globally, proven technologies remain the largest driver of investment while the availability of greenfield developments and access to a skilled workforce have become increasingly important factors in the past year.

Solar energy remains the most favoured renewable power generation source, jumping from 52% to 69% in the past year. The number of organisations considering solar in the next five years has almost doubled from 22% to 42% between the two reports. There has been a notable drop-off in investment into hydro (43% in 2020 to 37% in 2021) and onshore wind (42% in 2020 to 33% in 2021).

Battery storage is the leading non-power generation technology, with the proportion of organisations that have invested in the technology surging from 26% to 67% in the past year. This is followed by electric vehicles; carbon capture, utilisation and storage solutions (CCUS); and smart meters.

Despite these investment plans, the research also identified growing concerns among large businesses about barriers to investment. A lack of commercial incentives or economic benefits was the most commonly cited barrier (by 40% of respondents, up from 29% in 2020).

Michael Burns, partner and head of energy for EMEA/US at Ashurst, said:

"This research highlights how rapidly investment in clean energy projects is accelerating, particularly when compared to just one year ago.

"The investor base is broad: from integrated energy companies, to energy transition-specific and other private capital funds, as well as direct investment by governments. Investment opportunities in the market are equally as diverse, including proprietary decarbonisation technology, manufacturing and supply chain, greenfield and operational generation and supply projects, through to changing the behaviour of end users of energy as each part of the energy value chain seeks to achieve its climate change objectives.

"As the energy transition continues to gather pace, we expect to see investments being made both in projects that have clear government support but also, for those seeking higher returns or prepared to deploy capital earlier, investments in earlier stage project developments, including innovative energy storage, low carbon hydrogen and carbon capture and storage."

Paul Curnow, partner and head of energy for APAC at Ashurst, said:

"Confidence in technology is growing and will bolster the willingness of organisations to invest. However, as our research identifies, business strategies will also be influenced by the availability of greenfield developments and access to an appropriately skilled workforce.

"Our research highlights how corporates across many markets are moving ahead of government policy and regulation as institutional investors, asset managers and financial institutions, including central banks, increasingly set the pace and direction of net zero investment.

"As we move towards a carbon neutral world, it is clear many organisations will need to develop new business models. They will also need clear policy directions from governments to plan for a clean energy future."