The need to battle climate change is no longer up for debate. Regardless as to what sector you operate in – this summer’s record-breaking temperatures have proven that global warming is now everyone’s business.

To meet the UK government’s net zero target by 2050, the country needs to dramatically increase use of renewable low carbon energy sources to reduce our reliance on coal, oil and natural gas. With prices of fossil energy steadily rising, boosted by the war in Ukraine, the status quo appears increasingly unsustainable.

It’s clear that the energy industry is at a crossroads and action needs to be taken to reduce the dependency on fossil fuels and to accelerate the energy transition. The question is; what action can asset managers and investors take to ensure a greener future?

An era of disruption

As previously mentioned, widespread disruption caused by the Russo-Ukrainian War may help hasten the pace of a widespread transition to renewables. As things stand, the European Union (EU) imports 90% of its gas consumption, with Russia providing around 45% of that. Russia also accounts for around 25% of oil imports and 45% of coal imports.

With rampant fuel price increases in Britain, the war in Ukraine has highlighted the urgency and societal ramifications of energy security. Fossil fuels have led to enormous political problems over the years and Europe’s energy reliance on an aggressive Russia won’t be the last. Climate change too is a fundamental geopolitical threat with effects that put at risk our way of life.

Sustainable economic growth is contingent on a successful transition to a low carbon economy. Public and private sector leaders bold enough to seize the opportunity will reap the benefits of addressing the globe’s ongoing climate crisis.

Sustainable property

The Climate Change Committee calculates that buildings account for 23% of the UK’s greenhouse gas emissions and 59% of the UK’s electricity consumption. At the current pace of change, property investors should be aware that in just a few years from now, their assets could be overshadowed by greener new-builds that are more energy efficient. This has considerable implications for future property valuations.

The concept of renewable energy is far from new – nor is it an emerging technology. Renewable energy may be produced by various types of buildings, regardless of ownership forms or leasing agreements. With increasing stakeholder demand for sustainable property and a growing attention on setting net zero goals, renewable energy will play a large role in buildings of the future.

Rooftop solar is proving to be more financially viable now than it was a few years ago since it eliminates network expenditures, minimises losses and can primarily power the underlying building with surplus energy exported to the grid. In recent years, big retailers like IKEA owner Ingka, have installed 935,000 solar panels on the roofs of its warehouses and stores.

A greener future

In years to come, private markets will play a pivotal role in the energy transition. While there are still some feasibility issues for landlords and their tenants to overcome, the focus on cutting carbon will only increase amid tightening regulation and growing peer pressure.

At Targetfollow, we believe that the shift toward a green economy is creating a step change across all infrastructure sectors today, opening attractive investment opportunities in several areas. The new strategy will pursue investments in the mega-trends of energy transition and energy security, as well as digital and community infrastructure, sustainable mobility, and the circular economy.

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