Non-conventional energy generation is one of the most well-known industries in the impact investing field, having evolved from an illiquid or early-stage impact market to a mainstream market in the past 15 years.
However, non-conventional energy generation has many sub-concepts such as renewable energy, green power, sustainable energy, clean energy and alternative energy, which may sound similar but are very different in practice.
“The SDGs both highlight the importance of finance in enabling sustainable development, and present a global agenda through which companies delivering positive impacts will prosper. The challenge for investors lies in how to best capture this opportunity. The Market Map thus provides timely guidance for those wishing to pursue this through their public equities investments – widening the scope of traditional impact investing, whilst calling for rigour, clarity and transparency”.
Rose Beale, Thematic Analyst, Columbia Threadneedle Investments
For instance, clean energy refers to energy sources or energy production that do not directly harm the environment and society. This includes nuclear energy, clean coal, and gas. However, renewable energy focuses exclusively on energy production that can last for the foreseeable future and does not use fossil fuel inputs for energy creation. Therefore, coal, gas and nuclear energy are excluded from the concept of renewable energy.
In summary, there is a wide pool of definitions and categories, and governmental agencies such as the United States Environmental Protection Agency and international organisations (i.e. OECD and UN bodies) agree that different categories of non-conventional energy have different environmental impacts on, and provide different benefits to, society.
The Market Map focuses on concepts and definitions related to renewable energy only. The rationale to adopt this type of non-conventional energy generation is found in the United Nations General Assembly (2011) for renewable energy and in the SDGs. Both stress the need to expand infrastructure and investments in renewable energy sources.
The market is also increasingly adopting and investing in renewable energy sources. A study by Deloitte indicates that many corporations are pledging to generate as much as 100% of their power from renewable sources in the coming years. In addition, PRI data highlights that signatories allocated more than US$900 billion to renewable and alternative energy investments in 2016.
Definition: Renewable energy
Products, services or infrastructure projects supporting the development or delivery of renewable energy and alternative fuels, including: generation, transmission, and distribution of electricity from renewable sources including wind, solar, geothermal, biomass, small scale hydro (25MW), waste energy, and wave and tidal.
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Impact investing market map