Exploring Sustainable Investment Opportunities Across the Americas
As plans for this years Responsible Asset Owners conference for the Americas takes shape, it’s worth taking a look at where things stand right now, as well as reviewing the opportunities across this important market going forward.
The financial industry has undoubtedly seen an enormous shift in recent years towards sustainable investing, with investors across the world making a conscious effort to measure the environmental, social and corporate governance (ESG) of their investments. Whilst North America has arguably slower to step up to the plate than it’s neighbours across South America, as a whole, its increasingly clear that investors across the whole region are looking for opportunities that offer both a financial return and a positive impact on society.
The Global Scene of Sustainable Investing
Sustainable investing is growing at an unprecedented rate globally, with AUM exceeding $30 trillion as of 2020. This is double what it was just two years ago—a clear indication of its increasing popularity among investors. In fact, sustainable investments now account for almost a quarter of all professionally managed assets worldwide. It’s no surprise then that more and more companies are exploring ways to tap into this market.
Right now there are over 400 upcoming onshore and offshore wind farms across the United States in various stages of planning at a projected cost of $23 billion.
Meanwhile, Latin America is set to become a leader in alternative energy beside the Pan-American Highway, almost 600km (375 miles) north of Santiago, Chile’s capital, lies El Romero, the largest solar-energy plant in Latin America and among the dozen biggest in the world.
Its 775,000 grey solar panels spread out across the undulating plateau of the Atacama desert as if they were sheets of water. Built at a cost of $343m by Acciona Energía, a Spanish company, last month El Romero started to be hooked up to the national grid. By April it should reach full strength, generating 196MW of electricity—enough to power a city of a million people. A third of its output will be bought directly by Google’s Chilean subsidiary, and the rest fed into the grid. El Romero is evidence of an energy revolution that is spreading across Latin America. See below for just four projects on their way:
1. H2 Magallanes project (Chile)
H2 Magallanes is a green hydrogen project from a wind source to produce green ammonia. It will be located in San Gregorio, Magallanes region. The construction phase could require up to 5,000 workers, while operation could require 1,000.
Capex: US$15bn
Consists of the construction of a green hydrogen plant near Sierra Grande, Río Negro province.
The initiative also involves the construction of a wind farm that will feed the hydrogen plant and an export port near the town of Punta Colorada.
A solar plant would also be required, either in Salta or Jujuy, to compensate for the intermittent wind in Río Negro. The initiative will allow the creation of more than 15,000 direct jobs and be developed in three stages.
Capex: US$8.4bn
3. Ceará Green Hydrogen Hub (Brazil)
The initiative entails the construction of a green hydrogen and offshore wind complex. The project will create over 2,000 jobs in the construction phase and 600 for the running of sustainable energy production. The project has been earmarked for Pecém port, Ceará state.
Capex: US$6.95bn
The project involves the production of green hydrogen through 300 wind turbines with special characteristics due to the wind conditions in Tierra del Fuego. It involves the construction of a wind farm, a desalination plant, a green hydrogen and ammonia production plant and port facilities that enable export.
Capex: US$6bn
The Americas’ Sustainable Investment Landscape
In the Americas, there is an abundance of opportunities for sustainable investments. From renewable energy projects in Latin America (see above examples) to green bond issuances from Canadian banks, there are plenty of options available to investors who want to make a difference while still generating returns. Investors can also take advantage of ESG-focused ETFs or mutual funds that invest in companies with strong ESG ratings and practices. These funds tend to be less volatile than traditional funds and have proven to outperform their peers over the long term.
There are also numerous initiatives being launched across the region in order to encourage more sustainable investments, such as Brazil’s “Green Bonds Initiative” which was created in partnership with several government ministries and private entities in order to promote the issuance of green bonds within Brazil’s capital markets. This initiative seeks to spur investment in climate change mitigation projects, energy efficiency projects, biodiversity conservation projects and other environmentally beneficial initiatives across Brazil.
Conclusion:
As awareness about sustainability continues to grow among investors across the Americas, so too does the number of investment opportunities available for those looking for both financial returns and positive social impact. With so many initiatives being launched throughout the region—from ETFs or mutual funds investing in companies with strong ESG ratings, to government-backed programs aimed at promoting sustainable investments—there has never been a better time for CMO's CEO's CIO's who want to make an impact through their investments without sacrificing returns. By taking advantage of these opportunities now, they can help ensure a brighter future not only for themselves but also for generations to come both environmentally and in terms of ROI’s.
Speakers at RAO events in the Americas can therefore be considered as thought leaders with whom to collaborate on innovation and leadership in this important area.
The asset managers who are able to successfully navigate these changes will likely come out ahead of their peers in the industry. Opportunities for responsible investing strategies exist across multiple asset classes ranging from public equities to private investments such as real estate and venture capital. Asset managers will be able to tap into these opportunities by leveraging digital technologies such as artificial intelligence, big data and blockchain to gain better insights into ESG (Environmental, Social, Governance) criteria in order to make more informed investment decisions.
