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Key Takeaways | How Traditional Energy Funds are Shifting Toward Green Energy: A Conversation with Encap Investments and Quantum Energy Partners

The energy market has undergone significant change in the past 12 months, with even more on the horizon. Our webinar series explores how these changes have shaped—and will continue to impact—the energy industry, including discussions of what’s to come.

Our latest webinar featured McDermott partners Edward Zaelke and Parker Lee, as well as Shawn Cumberland, Managing Partner of Energy Transition of EnCap Investments, and Alex Jackson, Director at Quantum Energy Partners.

Below are key takeaways from the webinar:

1. Although energy transition investment funds may have different focuses, they generally take an all-of-the-above approach, with respect to investing, in the various subsectors of the energy transition and are willing to invest in any technology, in any portion of the energy industry (except for highly capital intensive projects with binary risk profiles).

2. Similar to the approach for conventional oil and gas investments, investment funds are focused on investing in strong management teams with a successful track record, which is manifested either through a management team that already has an interesting business plan or a management team that can successfully implement the investment fund’s strategy for a new business.

3. Environmental, social and corporate governance (ESG) policies have become pervasive in all industries—especially within the energy industry—and must permeate all aspects of an investment fund’s strategy. Effective ESG policies and proper environmental stewardship have become licenses to operate within the energy industry and without them, operating companies and investment funds will have extremely limited ability to gain legitimate interest from potential investment partners.

4. When developing a relationship between an investment fund and a management team for a new investment, it is critical for both parties to ensure there are aligned interests and expectations between the two parties.

5. Investment funds see abundant opportunities within the energy transitions space and are bullish on those investments’ capability to satisfy energy demand over the next two to three decades but are also looking to achieve diversification to protect their limited partners from the cyclical nature of energy investment.

To access past webinars in this series and to begin receiving Energy updates, including invitations to the webinar series, please click here.




Why 2030 is the New 2050 after the Leaders Climate Summit and What President Biden’s Accelerated Transition to a Sustainable Economy Means for Renewables Developers, Investors and Corporates

2030 is the new 2050 as US President Joe Biden has officially set a new goal for fighting climate change over the next decade in the United States. At the Leaders Climate Summit (the Summit) on Earth Day, he announced that America would aim to cut its greenhouse gas emissions at least 50% below its 2005 levels by 2030. If successful, this transition would lead to a very different America and would affect virtually every corner of the nation’s economy, including the way Americans get to work, the sources from which we heat and cool our homes, the manner in which we operate our factories, the business models driving our corporations and the economic factors driving our banking and investment industries. The effectiveness of this transition lies in the administration’s ability to pull on two historically powerful levers: Tax policy and infrastructure funding. However, tax policy will call upon multiple sublevers, such as increased tax rates, expanded tax credits, refundability, carbon capture, offshore wind, storage, transmission and infrastructure investment. All of this will be bolstered by the American corporate sector’s insatiable appetite for environmental, sustainability and governance (ESG) goal investment.

QUICK TAKEAWAYS

There were six key announcements at the Summit for renewables developers, investors and corporates to take note:

  1. The United States’ commitment to reduce its greenhouse gas emissions by 50% – 52% below its 2005 emissions levels by 2030
  2. The United States’ economy to reach net-zero emissions by no later than 2050
  3. The United States to double the annual climate-related financing it provides to developing countries by 2024
  4. The United States to spend $15 billion to install 500,000 electric vehicle charging stations along roads, parking lots and apartment buildings
  5. A national goal to cut the price of solar and battery cell prices in half
  6. A national goal to reduce the cost of hydrogen energy by 80%

President Biden’s goals are ambitious. It is clear from the history of renewable incentives in the United States as well as current developments that moving forward, the green agenda will predominately rely on two primary levers being pulled at the federal level: Tax policy and infrastructure funding. The federal tax levers mentioned above will not be pulled in a vacuum. Instead, they will be pulled in the midst of a tectonic shift among individual investors that now demand that institutional investors and corporations begin to create and meet ESG goals as individual customers are beginning to take a corporation’s climate goals and footprint into account when making purchasing decisions.

As a result, we discuss the following areas in greater detail below:

  1. Tax policy
    1. increased tax rates
    2. expanded tax credits
    3. refundability
    4. carbon capture
    5. offshore wind
    6. storage
    7. transmission
  2. Infrastructure bill
  3. ESG environment

DEEPER DIVE: BREAKING DOWN EACH LEVER AS WELL AS ITS OPPORTUNITIES AND CHALLENGES

  1. Tax Policy: The consistent message from the Biden Administration, at the Summit and elsewhere, makes clear that tax policy will likely play a significant role in the administration’s ambitious climate agenda. At [...]

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Three Takeaways: Tensions in the Renewable Energy and Environmental Markets


McDermott recently hosted Jonathan Burnston, Managing Partner of the energy sector financial services firm Karbone, for a discussion of recent developments affecting environmental, social and governance (ESG) investing, renewable energy and carbon offsets.

Three takeaways from this week’s webinar below:

      1. Interest in ESG investing is unlikely to fade. ESG indices have performed relatively well in the COVID-19 environment and the concerns that motivate ESG investing are not going away.
      2. ESG investing is different from reducing emissions or pursuing carbon neutrality. Positive returns from ESG investments do not themselves reduce emissions or mitigate the impacts of climate change.
      3. Corporate interest in becoming “carbon neutral” is also likely to continue. Due to recent economic disruptions, there may be some delays in achieving some previously announced commitments. However, the pressures and concerns that have motivated the interest in carbon neutrality remain powerful forces.

Listen to the full webinar.

To begin receiving Energy updates, including invitations to the Renewables Roundtable and Q&A Webinar Series, please click here.

Access past webinars in this series.




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