To many with a passion and vested interest in renewable and non-fossil fuel energy, the term “green energy” often elicits a rolling of the eyes, in recognition of the fact that words like “green” and “clean” don’t always convey the true net effects of these alternative energy sources, nor do they specify much. While that is undoubtedly the case, wind, solar, hydro and nuclear energy are inarguably what will help make or break human survivability on this planet long term.
The capital required to fund and get these projects and get them off the ground will involve government will and public mandates, but it will also involve a considerable amount of private and institutional money. Here is how financial institutions are investing in green energy.
What is Sustainable Banking
The term sustainable is open to interpretation, constantly being discussed, and is therefore very elastic. It can be used as a catchall distractor word that conceals rather than illuminates, or it can indicate and specify real initiatives and change. In the banking realm, sustainable typically refers to a commitment to do no harm, to pursue social equity and economic justice, and to conduct operations with transparency. Sustainable banking is a broad and growing field that deserves more attention and scrutiny in the mainstream than it currently receives.
Green Investment Banks and Funds
Many green investment banks and private equity funds have sprung up over the last decade or so whose investments are either exclusively or predominantly in green energy. Banks around the world, including Connecticut Green Bank, New Jersey Energy Resilience Bank, Green Tech Malaysia, Clean Energy Finance Corporation Australia, Technology Fund Switzerland and Japan’s Green Finance Organization are some of the highest-profile green investment banks/funds.
Australia’s Clean Energy Innovation Fund, for instance, is heavily invested in companies such as Soil Carbon Company, an enterprise dedicated to improving the drought resilience of farmland, and JetCharge, a company that specializes in electric vehicle charging infrastructure.
The legacy global banks have also put a lot of money into green companies and projects. In 2017, HSBC pledged to spend 100 billion dollars to help fight climate change, which would be allocated to sustainable and green finance initiatives.
Goldman Sachs has stated that it sees a $16 trillion dollar investment opportunity in green/renewable energy between 2020 and 2030. Traditional banks, while obviously profit-motivated, are already making sizable investments in green projects and initiatives and the scale and number will only increase as the 2020s roll on. They will be needed.
While major global banks, and particularly U.S. banks, are largely responsible for funding and perpetuating the fossil fuel paradigm, there are many banks around the world that have already divested or are slowly doing so, from dirty energy. These are often smaller banks and credit unions, but they are nonetheless financial institutions that are attempting real corporate social and environmental responsibility.
They include Alternative Bank in Switzerland, Nedbank in South Africa, GLS in Germany, Kiwibank in Newzealand, Mekur in Denmark, Spring Bank, Mascoma Bank and Sunrise Banks in the United States, and a surprisingly long list of others.
While it is easy to rail against finance for its role in the continuation of the fossil fuel zero-sum game every virtually every single person on this planet is forced to play, there is no doubt that the world of finance has and will have a crucial role in facilitating a green energy age. Some financial institutions and investors are already fully dedicated to this effort, while others are making more piecemeal changes. Then there are those institutions that show no signs of a philosophical shift anytime soon.
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