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The Sustainable Energy for All initiative was launched by the United Nations Secretary-General Ban Ki-moon to mobilize action and partnerships focused on sustainably meeting the increasing energy requirements of businesses and society. The initiative has set three primary objectives, to be met by 2030: ensuring universal access to modern energy services; doubling the global rate of improvement in energy efficiency; and doubling the share of renewable energy in the global energy mix.
This report looks at the financial services industry and identifies five priority actions it can take to reduce its energy use while simultaneously driving high performance.
The financial services industry has a significant opportunity to drive the development of sustainable energy in two ways:
It can finance projects to expand energy access, improve energy efficiency and increase the development of renewable energy sources. This financing can be provided traditionally, or via innovative financing mechanisms. Directing capital towards sustainable energy investments has the potential to drive significant revenue growth and increase brand value for the financial services industry.
It can transform its own operations, specifically its use of buildings and data centers, to consume energy more efficiently and realize cost savings. While the overall operations of the financial services industry are not overly energy-intensive, there are select opportunities to save energy across the asset portfolio while mitigating risk associated with volatile energy prices.
Given the current state of technology, a variety of industries have significant opportunities to reduce energy consumption as a means both to lower costs and to offer investors an attractive return. By directing more capital to investments with a demonstrated rate of return, investors can drive revenue growth. According to the McKinsey Global Institute, energy efficiency alone represents a $170 billion per year investment opportunity, of which $97 billion will come from developing countries.
On average, investments in energy productivity improvements would yield a 17 percent internal rate of return from future energy savings. Additionally, this capital outlay of $170 billion is feasible, representing only 1.6 percent of global fixed capital investment.
Two major cross-industry initiatives in which financial services firms may consider investing are:
These initiatives yield an internal rate of return of 36 percent and 35 percent, respectively.
In addition, real estate investment trusts have a significant business opportunity to reduce costs by improving the energy efficiency of their operations. It is estimated that, in the coming decades, real estate investment trusts will own approximately 30 percent of all commercial property. Real estate investment trusts can benefit from economies of scale due to the numerous properties in their portfolios. One of the best ways to boost portfolio value based on internal growth is through energy-related investments such as lighting retrofits and upgrades to heating, ventilation, and air conditioning.
The following section provides detail on four priority actions the financial services industry can take to become more energy efficient and advance their business opportunities in the sustainable energy market:
Direct more capital toward energy access and the commercialization of energy efficiency and renewable energy technologies. Increase energy efficiency of operations.
Use renewable energy to power operations and facilities.
Support microfinance institutions that work on energy access, energy efficiency and renewable energy.
Support policy frameworks that drive investment in energy access, energy efficiency and renewable energy.
October 2, 2012
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