Investors are more likely to invest in oil and gas over the next three years as they worry about missing out on high returns, but want Southeast Asia’s power grids to include plans for more renewable energy, a new global survey has found.
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“In the wake of heightened geopolitical tension, appetite for oil is rising,” said the ninth edition — or wave — of the Global Investors and Climate Change survey conducted by FT Longitude for the Climate Opinion Research Exchange (CORE).
Of some 1,000 institutional investors interviewed between 26 February and 1 April this year, 30 per cent expect to increase investments in oil over the next three years, up 10 points from a year ago.
“Concerns about missing out on returns remain the top reason why organisations expect not to decrease their fossil fuel investments,” the survey said. “The percentage saying it is currently too costly for their institution to exclude high-emitting sectors or companies from its investment portfolio has risen to 40 per cent from 33 per cent in the last wave.”
The survey respondents span 14 countries and are senior investment decision makers within their organisations. The Asian markets surveyed include Hong Kong, Singapore, Japan, Indonesia, South Korea and Malaysia.
Respondents were also more upbeat on investing in renewable energy, but only in the short term. The percentage which ranked clean energy as the best short-term investment rose to 14 per cent from 9 per cent in the previous wave, “but investors seem to be slightly less confident about the profitability of renewables compared with other energy sources in the long term.”
“The percentage who rank renewables top for returns over the next 10 years has dropped to 50 per cent from 56 per cent, losing ground to gas,” the report said.
Asian institutions are caught between pressure to follow returns from fossil fuels and the risk of litigation, found a survey by FT Longitude for the Climate Opinion Research Exchange (CORE). [Click to enlarge.] Image: CORE
However, more than half of respondents say they want to see more long-term plans to boost renewables in Southeast Asia’s power grid infrastructure before they invest in the region.
“The findings reflect a “growing reality across Southeast Asia [that] investors are looking for stronger policy certainty before committing capital to the grid-enabling infrastructure needed for the energy transition,” said Liming Qiao, chief executive officer and co-founder of the Future Energy Storage and System Integration Alliance (FESSIA).
In particular, clearer and more robust policies around energy storage and system flexibility will be essential to building investor confidence, she said.
There is fear among investors of legal backlash for investing in dirty energy — Asian investors are increasingly weighing the risk of being sued over their energy investments, said the report.
But a larger percentage — 47 per cent in the current wave from 33 per cent in the prior one — say it is “too costly” to exclude high-emitting sectors from their portfolio.
“Asian institutions are caught between pressure to follow returns from fossil fuels and the risk of litigation,” the survey said.
Still, investors are still being asked how their institutions intend to address climate change. Some 55 per cent of respondents said that their organisation generally votes in favour of shareholder resolutions that ask companies to disclose more information or take more action on climate change, compared to 49 per cent previously.
