Jonathan Sparks, Chief Investment Officer, UK & CI, HSBC Private Banking UK, argues that, despite the distractions of rising living costs and inflation pressures, green energy remains a key focus area for consumers, corporates and governments alike.
In order to achieve the ambitious net-zero goal by mid-century, we need to move away from coal and towards clean power five times faster than we are currently doing1. But against day-to-day living pressures, how do we keep our eye on the target for a liveable future?
Jonathan Sparks, Chief Investment Officer, UK & CI, HSBC Private Banking UK, argues that without a renewed focus on green energy and minimising the extraction of fossil fuels, targets will drift until it’s too late.
“Very recently, the IPCC stressed that it’s now or never when it comes to staving off climate disaster. It’s just not enough to put your money in a sustainable fund and be done with it. It’s down to all of us to make constant changes to how we live. We’re all responsible for the 2030 Net Zero goal, so we all have to actively play our part in this much needed post-COP26 revolution.”
Seeing beyond short-term problems
Creating a sustainable and healthy planet can sometimes feel like an expansive and almost unachievable task, but meaningful efforts can start in the family home and businesses.
“Consumers have been spurred on to take action,” Sparks continues. “Demand is ramping up for the likes of solar panels and electric cars – recent research tells us that more electric vehicles were sold in March in the UK than in the whole of 20192.”
Indeed, a new law that requires new build homes and buildings to have electric car charging points will come into force this year3. “You could buy a standard car today as opposed to an electric or hybrid one, but there’s the risk that they could become obsolete and potentially a sunken cost,” says Sparks.
“We know that consumers want to move over to more sustainable living, and energy efficiency of the home, for example, is an incredibly important element of that. Retrofitting buildings, insulating them properly, adding heat pumps – these are things that many of us can do now, and they represent huge opportunities.
“These activities can be expensive, but there are subsidies and grants available,” says Sparks. These range from energy efficiency funding and sustainable business growth grants from local authorities to the Green Homes Grant scheme and boiler upgrade programmes.
“This all underscores that government policy and consumer attitudes are in alignment – therefore creating a clear long-term growth opportunity and a great case for investment.”
It’s just not enough to put your money in a sustainable fund and be done with it.
Community spirit spurring change
Drawing on the spirit of community, towns and villages have begun embracing community-run energy infrastructures. These now exist all over the UK – from the southern tip of Cornwall to the Shetland Islands. The first generation of these projects were more often than not started by groups of people in small towns who saw the need for renewable energy in their neighbourhood (and reducing dependency on a costly national grid) – frequently in the form of large wind turbines.
The second phase, meanwhile, came with the introduction of the government’s ‘feed-in tariff’ – a scheme that provided payments for small-scale energy generation. People invested their capital in the equipment for solar, medium-scale wind and hydro projects in the knowledge that they would receive long-term payback from generating energy.
Post-COP26, countries across Europe have put their shoulder to the wheel when it comes to these alternative sources. In April this year, the largest double-sided solar farm in Europe, which will supply power to 75,000 households, opened in Greece4. And in Wales, the world’s first hydrogen hybrid heating system is being trialled5. These solutions not only tackle climate issues, but also reduce individual reliance on fossil fuel – in some cases these are also cheaper energy solutions.
We know that consumers want to move over to more sustainable living, and energy efficiency of the home.
Investing in your future
“There’s no denying that you have to pay for the right to live sustainably,” says Sparks. “But it might be worth thinking about these outgoings as part of longer-term decisions that are future proofed against increasing uncertainty around fossil fuels and regulatory headwinds. This is also true of the investment landscape where major institutions such as central banks and pension regulators are increasingly leaning towards sustainable investment.
“What’s more, these payments will impact your legacy and what you leave behind for family, loved ones and the world in general. And if you’re investing sustainably, and getting returns on those investments, consider looking at those as a way of offsetting the costs of implementing these green measures.
“It’s about changing mindsets around spending decisions. Retrofitting buildings or opting for different energy sources is going to be more costly, but it’s a longer-term approach.”