January 4, 2018 Read More →

Influential U.K. Investors Say Renewable Energy Transition Is Well Under Way

Financial Times, op ed by Anton Eser. chief investment officer, and Nick Stansbury, fund manager and commodity specialist,  Legal & General Investment Management:

The global energy system is on the cusp of a revolution and investors in the sector risk sleepwalking into a period of momentous change. Most agree that future energy markets are going to look very different from how they look today but there is a real risk that the transition happens faster than many expect — with significant consequences for investors who fail to prepare now.

Energy really matters to investors. The industry has nearly $10tn of invested capital and just two large energy companies providing approximately 20p in every £1 of dividend income from the FTSE 100. We are in the early phases of a transition to a low-carbon future. This marks the third “transition” that energy systems have gone through since the start of the industrial revolution. The first was the rise of coal and the second the rise of oil — this time, it is the rise of renewables.

These transitions historically have had far-reaching and dramatic implications that were underestimated at the time. Some commentators are basing their expectations for the pace of this transition on that of previous energy transitions. However, prior transitions were driven primarily by economics: coal replaced biomass because new technology enabled it to become a fundamentally better energy source — the pace of change was driven by economic merit.

This transition may well be different. Change is not being driven by technology (although it is enabled by it) but by social imperative and government policy. The public is no longer accepting ever-worsening pollution and the unrelenting rise of carbon emissions with the terrible consequences that would result. The pace of change may therefore be a lot faster than historic precedent would suggest.

More ($): Investors Must Face History’s Third Energy Transition

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