Full of energy
The renewable and sustainable energy sector is attracting an increasing number of wealthy and high-profile investors
The UK is in the grip of double-dip recession. The eurozone crisis seems to deepen with every passing week. The US recovery is fragile and may be faltering. These conditions leave financial advisers and wealth managers with very little room for manoeuvre when it comes to investment ideas – at least those with a reasonable prospect of preserving capital and generating growth.
Yet attractive investment opportunities do exist. Many of the UK’s wealthiest private investors are pouring significant sums of money into one sector in particular – renewable and sustainable energy. In May a survey of family offices and angel investors by law firm Taylor Wessing found that 40 per cent of those questioned planned to allocate at least 10 per cent of their investable assets into clean energy in the next 18 months. This was a 300 per cent increase in the number that allocated this proportion of their capital to the sector during the previous 18 months.
So what is attracting sophisticated investors to the sector and why now? In many ways the answer is simple – growth. While the broad UK economy has been shrinking in the past six months, figures from the department for business, innovation and skills indicate that the green economy is thriving. Sales in the low-carbon and environmental goods and services sector stood at £116.8bn in 2009/2010, growth of more than 4.3 per cent on the previous year. The BIS figures suggest a sector in excellent health.
There are sound fundamental reasons why this is the case. Global demand growth for energy and resources, energy security concerns and the depletion of remaining fossil fuel reserves are driving the move towards sustainable energy and resources. The impetus behind renewable energy, energy efficiency and sustainability – in the UK and globally – is only set to increase as natural resources become scarcer and traditional means of energy generation more expensive.
The way we live, consume resources and generate power needs to change or the lights may go out. With the stakes so high, the potential returns from investment in ‘game-changing’ technologies are extremely attractive. For instance, Tamar Energy, which plans to build more than 40 anaerobic digestion energy plants in the UK, has attracted a roll call of extremely high-profile investors, including Prince Charles’s Duchy of Cornwall, Lord Rothschild and Sainsbury’s. Its plan to generate 100 megawatts of green electricity within five years should yield an attractive return to investors. Many more similar projects will be needed for the UK to grow its renewable energy capacity, which is one of the many reasons why the potential of the sector is so great.
Investment opportunities are not restricted to the direct generation of power. There are many associated sectors that are poised to benefit from the drive towards greater renewable energy generation and sustainable living.