Investor scrutiny ramps up for businesses to deliver on energy transition strategies

  • Increased pressure from within – pressure to cut emissions is being driven from within companies. Three quarters of senior business leaders (75%) say pressure to invest in renewable energy from their own corporate boards was either “extreme” or “significant” exceeding the perceived pressure from customers, regulators and even NGOs.
  • Accelerating towards renewable energy – 62% of senior business leaders expect their organisation’s investment to flow away from traditional fuels and towards renewable energy at an accelerated pace over the next 12 months.
  • Leadership position for solar – solar energy is the most popular investment technology, targeted by nearly three-quarters (72%) of respondents.
  • Emergence of green technologies – emerging technologies are set to grow in appeal, with green fuels the most favoured.
  • Diversification of markets in energy transition – the investor base is diversifying, with a wide range of investors looking to enter the energy transition market as their understanding of it grows, and the risks and opportunities become better known.
  • Identification of investment barriers – barriers to investment include lack of raw materials (identified by 41% of respondents), manufacturing capacity (40%), regulation (39%) and skills shortages (39%).
  • Prediction of more litigation – legal disputes are set to rise. More than two thirds (68%) of respondents expect increased legal disputes related to the energy transition.

Businesses are facing increasing pressure to deliver on their energy transition investment plans as investor scrutiny around stalled progress ramps up, following new research by global law firm Ashurst. The market is also becoming more dynamic as global corporates explore a wider range of new technologies.

The report, Powering Change: Technologies Fuelling the Future, now in its fourth year, captures the views of more than 2,000 senior business leaders from across the G20 economies on the transition to a low carbon energy system.

The research explored attitudes towards the global transition to cleaner energy. It found the private sector is overwhelmingly committed to driving change, with almost all (95%) respondents expecting investments in renewable energy, the energy transition, and clean technologies to increase significantly over the next five years.

Despite continued global tensions and an increasingly turbulent geopolitical landscape, sustainable energy investment remains a top priority in the corporate agenda. Interestingly, this impetus for investment in renewables and low carbon technologies is most keenly felt from inside rather than outside organisations. Respondents reported feeling the highest degree of pressure from their own corporate boards and institutional investors (each at 75%) to invest in the transition.

As the renewable energy industry continues to diversify, mature and deepen, organisations are increasingly eyeing non-generation options, including pumped hydro storage systems and smart meters, in a bid to meet their transition plan ambitions. The research showed the power generation market is also shifting, with the focus expected to switch to offshore wind. Meanwhile, a range of emerging technologies are vying for attention, including green fuels, identified by 54% of respondents as a technology that is expected to mature in the next five years, closely followed by nature-based solutions (48%) and air storage and tidal generation (each at 42%).

The vast majority (81%) of respondents saw investment in renewables as essential to their organisation’s strategic growth success, with solar energy the most popular current target. Nearly three-quarters (72%) of respondents said they are currently investing in, or have decided to invest in, solar. The optimism for renewables highlights that jurisdictions which develop the right regulatory frameworks will be the ones likely to benefit the most from the significant investment appetite of the private sector, though there is still significant work for governments to do here.

The responses suggested that businesses must also forward plan for potential legal risks, with over two thirds (68%) of the G20 respondents anticipating an increase in legal disputes related to the energy transition over the next five years, while 64% of European organisations also expect an increase. Areas of disputes include claims of greenwashing, litigation to prevent the approval of energy projects due to their environmental and societal impacts as well as issues relating to the decommissioning of assets.

Michael Burns, Global Co-Head of Energy at Ashurst, said: “It is no surprise that those working in the energy industry expect the pace of change and investment in the energy transition to accelerate. However, what our research does highlight is the lack of certainty about what the next phase of the transition looks like. As the energy transition progresses and the renewable energy market matures, it’s clear that when it comes to meeting the targets being set by governments, there are enormous opportunities for those organisations willing to take a bold and strategic approach.”

Dan Brown, Global Co-Head of Energy at Ashurst, added: “There is no doubt that Directors, CEOs and other senior managers are increasingly focused on the energy transition, with investor scrutiny intensifying. Leaders are facing increasing pressure – from a wide variety of stakeholders – to transition their own business, as societal attitudes towards carbon emissions continue to evolve. Balancing interests is complicated and no easy feat, but businesses which understand the challenges and opportunities the transition presents, and are prepared to act confidently will be best placed to succeed and make substantial headway in realising their ambitions.”

Read the full report here.

/Public Release.