EXPLORE the PORTFOLIO-WIDE implications
1. Establish clear positions on decarbonization, investment objectives and time horizon
For CIOs it is imperative to clarify their decarbonization objectives with key stakeholders and align their investment timeframe with the energy transition.
Definitive answers to a few simple questions can be clarifying.
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2. Investors need to consider multiple approaches to decarbonization
3. Closely monitor the current landscape and future trajectory of government policy
Minimizing a portfolio’s current carbon footprint offers the benefit of supporting current companies with low-carbon emission today, but requires evaluation of future emissions as well.
Investors that take a longer-term perspective should consider firms that have the potential to reduce their own emissions as well as technologies with high potential to avoid carbon emissions in the future.
Investors need to be aware of the shifting policy landscape because it alters the outlook for investment in every region.
Government policy can impact the risk-reward proposition of energy investments at every stage of development – from basic research all the way on through to large-scale projects.
Government involvement in innovative energy technologies can attract private investment
Source: US Department of Energy. March 2024.
In developed markets, government involvement in early-stage funding of innovative technologies can also attract private capital. A study examining investment by the US Department of Energy in cleantech innovations suggests that government funding during early stages of carbon capture and hydrogen production did indeed lead to greater private capital flows in subsequent years.