Verdantix: How Can Governments Inspire Green Investments?
The UK government's recent pledge of £22bn (US$28.97bn) for carbon capture projects has catalysed a significant surge in private sector investment in the nation's green energy sector.
This substantial commitment has not only reinforced the UK's position as a leader in sustainable finance but has also sparked a domino effect of investments from major international players, according to thought leadership from Verdantix.
Meet Verdantix
Founded in 2007, Verdantix is a research and advisory firm that supports world-enhancing innovation through thought leadership, working to define tomorrow.
Verdantix’s research specialisms are:
- EHS & Quality
- ESG & Sustainability
- Net Zero & Climate Risk
- Industrial Transformation
- Real Estate & Built Environment
- Risk Management
European investment in UK energy
The ripple effect of the UK government's initiative is evident in the commitments of other international firms.
Danish multinational Ørsted and Portuguese company Greenvolt have pledged US$10bn and US$3.1bn respectively towards offshore wind farms in the UK. These investments underscore the pivotal role of clear and proactive government policy in attracting private sector capital to the green energy market.
Spanish energy giant Iberdrola, owner of Scottish Power, has announced plans to invest US$30bn in renewable projects across the UK over the next four years, effectively doubling its previous commitment.
Iberdrola Executive Chairman Ignacio Galán says: “After having invested more than £30bn in the last 15 years, the clear policy direction, stable regulatory frameworks and overall attractiveness of the UK are leading us to double our investments for 2024 to 2028, reaching up to £24bn.
“This is a vote of confidence in the UK’s clear and stable policies and is a major boost to the economy and the path towards green energy security and net zero. The benefits of electrification in terms of energy security, industrial development, jobs and decarbonisation are shared ambitions of the UK and Iberdrola.”
This investment will encompass high-voltage cables and the construction of additional wind farms, significantly bolstering the UK's renewable energy infrastructure.
What is the global impact?
The UK's success in attracting green investments is not occurring in isolation. It forms part of a broader global trend, with potential to influence international markets.
“The implications of these investments extend beyond the UK,” says
Isobel McPartlin, Analyst at Verdantix.
“Successful projects could serve as a model for other countries, inspiring similar commitments and potentially leading to a ripple effect in international markets.
“There is precedent for this, with the German government’s Energiewende initiative helping private capital investments in green energy technologies grow by 35% in 2019-2020. Increased investment in the UK has similarly attracted global investors seeking stable opportunities in clean energy, shifting capital flows towards renewable projects worldwide – particularly in emerging markets.”
Moreover, the influx of investment into the UK's green sector is attracting global investors seeking stable opportunities in clean energy. This shift in capital flows towards renewable projects is particularly significant for emerging markets, where sustainable energy infrastructure is crucial for economic development and climate resilience.
The role of financial institutions
Alongside governments, financial institutions are playing a pivotal role in this green transition.
A report by the City of London Corporation and Climate Policy Initiative revealed that tracked UK financial institutions have nearly tripled their investments in clean energy projects in just one year, reaching US$2.3bn in 2023. This represents the fastest rate of increase across all global financial centres studied.
Verdantix also highlights the improvements in transparency underpinning financial institutions' net zero targets. By 2023, half of the tracked UK institutions disclosing their net zero target portfolio coverage had set targets covering more than 70% of their invested assets.
“Too many governments and companies still think that climate risk is a problem for the 2030s or beyond,” believes David Metcalfe, CEO and Co-founder of Verdantix.
As the UK continues to navigate its path towards net zero, the government's role in creating a stable and attractive investment environment for green projects will be crucial.
The recent surge in investments suggests that the UK is on the right track, but sustained commitment and well-executed policies will be essential to maintain this momentum and achieve long-term sustainability goals.
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