GLOBAL – Institutional investors face significant limits to a large increase in renewable energy projects, according to a study by the Climate Policy Initiative (CPI).

The study, entitled 'The Challenge of Institutional Investment in Renewable Energy', cites government policies and investment practices among the barriers.

If all policy barriers were removed and investors optimised their renewable energy-related investment practices, CPI estimates that institutional investors could supply one-quarter to one-half of the investment needed to fund renewable energy projects through to 2035.

However, even at these levels, it is unclear whether institutional investment would be enough to lower the cost of financing renewable energy materially.

David Nelson, senior director at the CPI, said: "Policymakers and renewable energy project developers often look to institutional investment as a potential source of capital that can help reduce the cost of wind and solar projects.

"Our findings suggest that, in the near future, this is unlikely to be the case without drastic shifts in government policy, regulation and investment practices."

Increasing institutional investment beyond these levels will require the creation of new types of investment vehicles accessible to a wider range of institutions while meeting institutional constraints on liquidity and diversification.

In other news, Doug Cogan, vice-president of ESG research at MSCI in Boston, told IPE that the US divestment campaign on fossil fuel companies whose products contribute to global warming bears watching similar to the one on firearms.

He said: "This campaign has spread to more than 250 college campuses, much like how the South Africa divestment campaign got its start. Because the fossil fuels industry is much larger than firearms in terms of stock market exposure, fiduciary hurdles to divestment are also much higher.

"At the same time, one of the financial arguments being made is that four-fifths of recoverable carbon fuels may have to be left in the ground as stranded assets in order to prevent long-term disruptions to the earth's climate system. As evidence of the damaging effects of climate change mount, this fossil fuels campaign may have long-term staying power."

Meanwhile an ESG geographic portfolio analysis of the FTSE 100 companies by Camradata has revealed they are less exposed to potential environmental issues such as pollution and water scarcity than the 1,000-plus companies in the comparative world index.

But the FTSE 100 is more exposed to social and governance issues, with lower scores for a list of factors ranging from education and economic inequality to corruption and business rights.

This can be attributed to the global reach of the companies' commercial operations.

Although 94.4% of holdings were in the UK, only 17.5% of sales revenue was UK-based.

This indicates that the 76.9% of sales elsewhere could potentially be exposed to ESG risks.

The analysis also reveals the top 10 highest-scoring companies and top 10 lowest across ESG themes.

Based on the disclosed geographic footprint of the companies within the FTSE 100, one of the least ESG-exposed companies is financial services company Hargreaves Lansdown and one of the most exposed is gold mining firm Rangold.

ESG themes where the FTSE 100 has scored higher than the world index include energy efficiency (environmental), employment (social) and financial stability (governance).

Themes where it has scored lower than the world index include water infrastructure needs (environmental), security issues (social) and business rights (governance).

Lastly, specialist fund manager Bridges Ventures has sold its stake in Whelan Refining to the company's management team.

Bridges led the investment in Whelan in 2006, alongside Catapult Venture Managers, to fund the refurbishment and re-commissioning of a redundant oil refinery in Stoke-on-Trent.

The plant was re-engineered to the highest technical and environmental standards to become the first and only waste oil refining plant in the UK – recycling waste oil to produce base oil, which is sold back to the lubricant industry.

The exit delivers a return representing a 33% IRR and 4.7 times the total investment for Bridges Ventures' Sustainable Growth Fund I.

Since 2006, Whelan has helped to successfully divert more than 100,000 tonnes of waste oil from use as a low-grade fuel while producing net savings of more than 300,000 tonnes of greenhouse gas emissions.  

In addition to environmental impact, the plant operates out of Stoke-on-Trent, which is in the most deprived 8% of wards in England, fulfilling one of Bridges' impact themes of investing in underserved areas to stimulate the local economy and create jobs.

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