ESG (environmental, social, and governance) investing is emerging as the investment trend of our time, and clean energy is leading the way.
According to a recent video from the Washington Post,
“Globally, clean energy investment is expected to account for half of total investment in the entire energy sector in 2020.”
While clean energy investment has been outpacing fossil fuel investment for years now, its growth in the years ahead will depend on continued political support. Fortunately for the clean energy industry, virtually every major world government appears to be rallying behind it.
The Washington Post goes on to explain in the aforementioned video that,
“. . .global powers have . . . recently doubled down on clean energy, with China, the world’s biggest polluter, even pledging to go carbon neutral by 2060. It’s the biggest climate commitment made by any nation. The EU has tied coronavirus stimulus money to green energy plans, and pledged around a third of its €1.8 trillion euro recovery fund to climate initiatives while investing specifically in wind, solar, and batteries.”
But no country’s government has as much of an impact on the clean energy sector as the United States’.
According to a BNN Bloomberg article published today,
“A Democratic sweep of both houses of the U.S. Congress stoked a record flood of cash into renewable-energy exchange-traded funds this week.”
“The US$6.2 billion iShares Global Clean Energy ETF (ticker ICLN) lured a record UA$691 million of inflows so far this week, according to data compiled by Bloomberg. Meanwhile, the US$4.6 billion Invesco Solar ETF (ticker TAN) is on track to take in nearly US$370 million this week — another all-time haul.”
Although far from guaranteed, a Democratic majority in U.S. Congress greatly increases the likelihood of Biden passing his green energy policies. If these policies come to life, what we saw this week may just be a taste of what’s to come; a recent survey from the CFA Institute found that while ~70% of institutional and retail investors have an interest in ESG investing, only 19% of institutional investors and 10% of retail investors currently invest in ESG products. This suggests that while investor enthusiasm for ESG products is high, investor confidence is still lacking.
Clean Energy Investments Could Dominate in 2021
Governments across North America, Europe, and Asia are investing in clean energy like never before. As a result, a growing number of investors are buying into clean energy ETFs — a trend that could accelerate this year, especially if Biden’s policies come to fruition.