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Renewable energy at tipping point – with more investment needed

In a new report, the World Economic Forum has concluded that renewable energy is becoming competitive with fossil fuels, but the industry needs institutional investments.

The World Economic Forum analysis shows that the cost of generating electricity from renewables has plunged over the last three years and is now equal to that of coal and natural gas. In the past three years solar costs have fallen 80% and wind costs have dropped 30%.

While this trend is very encouraging, less than 0.5% of institutional dollars are invested in renewables. According to the report, of the top 500 asset owners in the world, including foundations, pensions and endowments, only 0.4% of their $38 trillion worth of total assets under management are low-carbon investments.

The report mentions major regulatory challenges, but also points to one solution that could proliferate under the Paris Agreement: carbon pricing.

“While there is no easy solution to the regulatory challenge,” the report concludes, “the establishment of a widespread market for carbon would be a large step to coordinate efforts and provide investors with a globally accepted price for the output of their projects.”More about the report here.

Carbon pricing would be helpful, yet many companies are not waiting to act on climate change. The Carbon Disclosure Project is out with a new report that says that the number of companies willing to spend money on this endeavor has tripled over the last four years.

The non-profit, which works with companies to get them to disclose their carbon output, says that 1,249 companies disclosed their practice of pricing carbon emissions, or plan to do so soon. This represents a 23% increase from 2015. The report also notes that 90% of the respondents said that climate change poses an inherent risk to their businesses. More about the report here.

Leadership on climate is happening, but not fast enough. The more we as investors are willing to shift our money away from fossil fuels toward renewables, the better our chances are of averting climate catastrophe. It’s time for us all to ask where our money is being invested and to shift our dollars toward renewables. The shift is daunting, but the alternative is worse.

To learn more about investing in the clean energy economy, contact Barry Vesser at bvesser@theclimatecenter.org.