GREEN FOR GREEN: Once Skeptical, WALL STREET Now AIMS To Clean Up

by JOHN GREGERSON | Nov 20, 2015

Were tree huggers really hugging a money tree all along? Clean energy now is becoming synonymous with high-powered investment, it seems. according to recent news from Wall Street. Amid signs of continuing growth and stabilization in the renewable energy sector, some of the nation's leading financial institutions now are banking heavily on clean technology, which is in high demand.

Earlier this month, re-branded finance giant Goldman Sachs announced plans to invest $150 billion in solar energy, wind farms and power grid infrastructure over the next 10 years, eclipsing a previous pledge to pour $40 billion into the renewable sector by 2012. In January, global banker Citigroup also pledged to invest $100 billion in clean energy by 2025, as compared to a $50 billion,10-year pledge it had made in 2007. Meanwhile, Bank of America also upped the ante this year, unveiling plans in July to boost its ongoing environmental stake from $50 billion to $125 billion in the next decade via “lending, investing, capital raising, advisory services and developing financing solutions for (global) clients,” the company said.

All three enterprises say the allocations not only amount to smart investment, but comport with existing policies to assist in reducing carbon emissions worldwide. As evidenced at Greenbuild 2015 in Washington DC this week, that sentiment continues to spread. In fact, Kyung-Ah-Park, Goldman Sachs director of environmental markets, recently noted that clean energy has reached an “inflection point,” meaning more renewable energy systems were put in place this year than conventional systems.

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Numbers hit an 'inflection point' last year, where more renewable energy systems were put in place than conventional systems

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Her conclusions are supported by a study by NYC-based Bloomberg New Energy Finance (BNEF), which charted a 16% leap, to $310 billion, in worldwide clean energy investment last year. The surge was the sector's highest since 2011 and second highest, both in dollars and on a percentage basis, since Bloomberg has been surveying the sector in 2004. This month, in fact, BNEF is launching Climatescope 2015, the fourth annual edition of its helpful "clean energy country competitiveness index."

According to Bloomberg's 2015 data, much of the latest increase can be attributed to demand for large-scale and rooftop solar photovoltaics in the U.S. and China, as well as a record $19.4 billion in European offshore wind projects. Even so, the BNEF data also suggests the sector may be reaching a plateau.

During the second quarter of this year, clean energy investment in China totaled $27.9 billion, up 15% in quarter-to-quarter comparisons. U.S. investment rose 3%, to $12.2 billion, for the same period. While Europe invested slightly more, $12.7 billion, its total represented a 27% decline in quarter-over-quarter expenditures. Total worldwide expenditures for the quarter were -0.2% – or basically flat.

By comparison, the sector posted a 1% decline in third quarter from the same period a year earlier. Once again, China led the pack, with investments of $26.7 billion, or a 5% increase, in quarter-over-quarter comparisons, followed by the U.S., with investments of $13.4 billion, a 9.3% increase over the same period, chiefly on the strength of several wind and solar projects.

Europe, meantime, continued to slide in the third quarter, its investment plummeting 48%, to $5.8 billion, with Angus McCrone, senior analyst with BNEF, citing a lull in offshore wind financing.

The upshot for major investors, financial firms included, is that demand for clean energy is neither uniform nor invariable from region to region, though a key feature of 2014 was rapid expansion of renewables in developing countries.

Despite the sector's ups and downs, however, Goldman in particular says it is committed to the market for the long haul now. But should a U.S. initiative that provides businesses and residents a 30% tax credit for installing renewable energy expire in 2016 and, as planned, be replaced by only a 10% credit, then the Wall Street titan has indicated it may shift its solar focus from the U.S. to other countries. Other finace institutions will likely follow, of course, but some in the market believe that solar energy, in particular, is now at a competitive price point where subsidies may no longer be needed, or desired.

Either way, greener balance sheets are now driving the green energy market like never before.