From Guest Blogger Bára Sýkorová: Bank Debt and Fortune 500 Companies–How the Future of Renewable Energy Is Being Shaped

The way that renewables are being integrated into personal and community life does not solely depend on the backing from people or governments.
While it is essential for people to embrace renewable energy in their daily lives and for governments to invest in renewable projects, the landscape of renewables is substantially dependent on the financial backing of banks and big investors.

As such, taking a closer look at what is taking place within the renewables industry (particularly at banks and investment companies) is useful both because it creates a better understanding of the current situation, but also because it can help provide insight into future trends and shifts within the market.

Many times, governments provide profitable avenues for corporations looking to turn a profit from renewables. But, while turning a profit from renewables used to be a sure bet at the beginning of the 2000s, the economic crisis and its subsequent fallout has made investing in renewable energy, such as different types of solar power and wind energy, more risky.

The main concern is the higher interest rates that banks are imposing on investors. However, this is not without good reason. Before 2008, there was a ‘flood of cheap money’ that disappeared when the banking crisis took place. During that period, in order for bankers to attract investors they lowered their interest rates.

However, the post-crisis economic landscape is rapidly changing so financial institutions are becoming exceedingly scrutent when analysing the bankability of an investment. Thus, interest rates are naturally higher for riskier investments to offset the uncertainty. In other words, if the bankers would continue offering low interest rates for high-risk investment, then they would risk losing money.

This is why banks, at the moment, are investing more in lower risk and less expensive energies, such as coal and natural gas. That being said, while renewable energy is proving to be a riskier avenue, it can provide plenty of social capital for companies looking to improve their perception in the eyes of the public.

That is why American Fortune 500 companies have started looking closer into this. Some of the big name brands investing in renewable energy at the moment are: Apple, Salesforce, General Motors, Google, Facebook, Amazon, Microsoft, and many others.

A report published in 2017 by the World Wide Life, together with Ceres, CDP, and Calvert Investments, shows that 48 percent of the Fortune 500 companies have set at least one climate target for their company.

At the same time, the Fortune 100 companies are the ones leading the way by investing the most in renewable energy. Sixty three percent of these companies have at least one sustainability target set, compared to forty three percent of the 100 smallest Fortune 500 companies. Overall, there is also an increase in companies pledging a 100 percent clean energy plan.

What the banking investment situation and the corporate backing shows is that renewable energy is in a complex and dynamic state of affairs. However, even if the economic viability for the banks is lower than previously, and the Trump administration is lobbying against some green investments, the future of renewable energy continues to be bright.

The Fortune 500 companies seem to be the first to have embraced the opportunities provided by renewables. The companies are saving billions in converting to green energy. Moreover, they are not only investing because renewable energy is a smart, economically viable solution but also because it is what their clients want.

In the future, the traction provided by investors and companies will likely increase the funding for renewable energy projects. As already stated, renewable energy represents a smart, albeit risk prone, investment. With popular awareness of the necessity for reducing greenhouse gas emissions grows, and with governments and companies striving to meet the Paris Agreements climate goals, more and more people and collectives will wise up to renewable energy being the best investment for securing economic, social, and political relevance going forward.