Apollo Says Anti-ESG Backlash Warrants Caution: BNEF UpdateApr 25, 2023 by Bloomberg
(Bloomberg) -- The opportunities and challenges of the global energy transition are driving discussions on the second day of the BNEF Summit in New York. The push to slash emissions is expected to attract $196 trillion in investments through 2050, according to BloombergNEF.
Still, the transition is proving bumpy, even after the US passed landmark climate legislation that promises to supercharge the clean-energy boom. A backlash against renewable energy in Texas threatens to chill solar and wind development in its biggest market. Extreme weather is taking a toll on power grids that increasingly rely on renewables. And some technologies designed to slash emissions, including carbon capture and sequestration, haven’t quite taken off.
Time stamps are New York.
Emerging Markets Aren’t Spending Enough on Energy Transition (12:02 p.m.)
Emerging markets aren’t investing enough in the energy transition compared to the size of the challenge, said BNEF’s head of energy transitions Luiza Demoro.
Only 8% of total investments in energy-transition technologies went to emerging markets in 2021, down from a record 20% in 2012, according to a BNEF presentation. Most spending is concentrated in Brazil and India, while many emerging economies aren’t receiving any investments at all, Demoro said. The pipeline of clean-energy projects in such markets has fallen since 2019 partly because of the impact of the pandemic, she said.
Bank Financing Needs to Go Green (11:03 a.m.)
Banks need to shift their financing priorities to help avert the worst consequences of climate change, according to Katrina White, a sustainable finance associate at BNEF.
BNEF has devised a metric that calculates the ratio of clean-energy lending and equity underwriting relative to the amount flowing to fossil fuels. That ratio was roughly 0.8-to-1 at the end of 2021. But it needs to hit 4-to-1 by 2030 if the planet is to meet the goals laid out in the Paris Agreement of 2015, White said during a presentation.
Anti-ESG Backlash Forces Precise Communications, Apollo Says (10:26 a.m.)
Republicans attacking environmental, social and governance investing is forcing Apollo Global Management to be more precise in how it communicates its strategy, according to Dave Stangis, chief sustainability officer.
“The conversation, the rhetoric isn’t changing the way we do business,” he said. “But it’s definitely helped the conversation inside the firm to be more precise” when discussing ESG topics, he said.
Carbon Management Opportunities Under IRA May Be Underappreciated (10:07 a.m.)
Energy companies haven’t yet realized the full scope of opportunities to develop carbon sequestration and storage projects in the US under the Biden administration’s Inflation Reduction Act, according to Noah Deich, the deputy assistant secretary for carbon management at the US Energy Department.
“We’re still thinking of carbon management predominantly as a regulatory defensive mechanism, how we’re going to keep our existing assets working in a mid-century net-zero strategy,” Deich said during a panel discussion. “That’s no longer the opportunity with the IRA and the Infrastructure Law in the US — it’s really about how we turn North America into a leader in carbon management.”
Inflation Is Accelerating Energy Transition, Blackstone Says (9:52 a.m.)
Inflation is hastening the shift to cleaner technologies such as electric vehicles, said Rob Horn, global head of the sustainable resources group at Blackstone Inc.’s credit group.
“Inflation is acting as an accelerate of the energy transition, making electric vehicles economic,” Horn said.
Blackstone was investing in residential solar in the US and Europe, as well as carbon-intensive industries to help them shift to cleaner fuels, according to Horn. President Joe Biden’s landmark Inflation Reduction Act made the market bigger for clean projects, he said. Horn added that the world is focusing on an “energy trifecta” — climate change, energy reliability and affordability. “We need an inclusive process.”
AI Is Critical to Energy Transition, Schneider Says (9:34 a.m.)
The energy transition can’t happen without artificial intelligence to help manage increasingly complex power grids as households and businesses become bigger energy users, Schneider Electric SE’s Gwenaelle Avice-Huet said in an interview on the sidelines of BNEF’s event.
AI can also help better predict and manage electricity usage, such as by tapping electric vehicles, household solar, batteries, heating pumps and other appliances, said the chief strategy and sustainability officer of Schneider, which has an in-house AI team. The technology can also help companies perform maintenance before power plants break down.
Clean-Energy Deals Hobbled by Challenging Economy (9:19 a.m.)
The volatile economy is slowing clean energy deals, according to veteran financiers. High interest rates, inflation and the failure of Silicon Valley Bank have made it more challenging to put together financing packages. Transactions are taking longer to complete, valuations are down and initial public offerings have become much less common.
It also means startups are facing more scrutiny as they pursue funding. Growth potential is always important, but the people providing capital are also paying more attention to other factors including potential returns, scalability and when a company might reach break-even status, said Sucharita Dasa, a Citigroup Inc. managing director for clean energy investment banking.
“All of those have become more important in the past 12 months,” Dasa said during a panel discussion Monday night. “It’s literally the year of the complex deal.”
Canadian Oil Sands Have Decarbonizing Advantage, Group Says (8:57 a.m.)
Canada’s oil-sands explorers are well positioned to decarbonize their production relative to most other basins around the world, according to Kendall Dilling, president of producer coalition Pathways Alliance.
The region has the competitive advantage of scale over other basins, with roughly 3.5 million barrels a day of production concentrated among just a few suppliers. Also, the western Canadian region sits on a geological formation that is “absolutely tailor-made” for carbon storage, Dilling said in Tuesday’s panel discussion.
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