July 08, 2008
Renewable Energy Wows World Investors
by Anne Moore Odell
The United Nations Environmental Program reports a new record in sustainable energy investments in
2007 with more than $148 billion invested globally.
Investments in the wind sector lead the way in the rapidly expanding renewable energy industry.
2007 saw a 60% increase over 2006 in sustainable energy investments, according to the United
Nations Environmental Program's (UNEP) report
"Global Trend in Sustainable Energy Investment 2008."
Investment in new renewable
energy capacity, otherwise known as asset finance, is a major reason for the huge growth in
investments, with $84.5 billion invested in 2007 alone. Public market investments in renewable
energy doubled between 2006 and 2007 with $23.4 billion outlaid. Adding together all new monies
invested in renewable energy, the UNEP counts more than $148 billion.
The report was
written, in part, to help government policy makers and strategic investment makers get the "big
picture" on renewable energy investments. Eric Usher, head of the Renewable Energy Finance Unit,
UNEP, and one of co-authors of the report told SocialFunds.com, "For example, if you are a bank,
there is a lot of information in report to help you decide if you should move into the renewable
sector and helps with strategic focus. On the governmental side, the report can help policy makers
understand what all the different dollar amounts mean."
Although sustainable energy
currently represents only 5.4% of the world's energy supply, almost a quarter (23%) of new power
generation capacity added in 2007 was sustainable. Investments in sustainable energy grew across
all sectors, including wind, solar, and biomass. Investors are also supporting the development of
new technologies including energy efficiency.
"New renewable energy is so dynamic," said
Usher. "One of the interesting parts of renewable investments is that are five to ten renewable
technologies that aren't competing with each other and that creates diversified basket to invest
in. Wind and solar don't compete with each other, and biofuel is used for transportation,"
The credit crisis that affected public markets in the first quarter of 2008 was felt by the
renewable market, with fewer IPOs and stock prices down 17.9%, according to the report. Yet the
second quarter of 2008 has seen the renewable markets bounce back above the first half of last
The report states, "Although asset finance is down somewhat, VC/PE investment,
public market capital raising and stock prices are all healthy, indicating that the finance
community still sees strong fundamentals underlying the sector and is increasingly looking to take
part in its future growth."
Developing nations, specifically China, Brazil and India, are
seeing a huge growth in renewable investments. These three markets have seen Asian governments
investing heavily in research and development of clean energy and energy efficiency.
Corporate mergers and acquisitions also saw an increase in activity of 52% in 2007 with $25.7
billion moving within the industry. Following the trends in the wind sector, UNEP notes "wind
assets are gradually being transferred from developers to utilities."
People investing in
the beginning stages of new renewable energies are betting on huge growth potential with the UNEP
reporting early-stage VC growth of 112% in 2007 to $2 billion. The solar sector had the largest
amount of VC investments at $3.7 billion. However, biomass and the conversion of waste into energy
saw an amazing growth of 432% in VC.
Venture capital is moving downstream with
renewables, specifically solar, as investors are financing projects on the ground. Usher pointed to
the multitude of technologies at the different stages of development as a particular strength of
the renewable energy industry. In that same vein, Usher suggested if the world's energy equation is
going to be restructured, investors and governments shouldn't try to pick one new technology to
solve all energy needs.
Public equity funds that focus on clean energy were launched in
record amounts last year with 17 funds started in 2007. Only five funds were launched two years
ago. UNEP notes that more than $30 billion is invested in clean energy funds. This is on top of
$26.4 billion invested in environmental funds and $10.9 billion in funds focusing on renewable
Usher believes that development of new funds focusing on clean energy could result
in more sustainable energy products: "The arrival of these heavyweight fund managers to the sector
is likely to encourage the larger publicly listed companies they normally invest in to expand into
sustainable energy and other low carbon sectors."
Renewable energy is both a mainstream
investment and a mainstream energy source, reports Usher. Since starting in 2004, renewable energy
companies have made strong showings in stock markets and with more institutional investors, and
investment banks have started to invest with renewable companies.
thought about renewables as technologies for the future," said Usher. "All of the a sudden around
2004, these companies started to make strong revenue streams, and investors started saying they are
like any other industrial sector of today."