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Three Questions Directors Need to Ask About Cleantech Innovation and Investments in Renewable Energy

Three Questions Directors Need to Ask About Cleantech Innovation and Investments in Renewable Energy Background Image

Women Corporate Directors’ 2021 Global Institute – A Recap of Lauren Collins’ Clean Energy Panel

If there was a wave of interest in environmental, social and governance (ESG) investing in the run-up to 2020, it mushroomed into a tidal wave during the upheaval of the COVID-19 pandemic.

Panelists who participated in “The Future of Cleantech Innovation and Investments in Renewable Energy” roundtable during the Women Corporate Directors summit, moderated by Lauren Collins of Vinson & Elkins, don’t see it dissipating in the near future. The discussion took place on June 10, 2021 as part of the organization’s 2021 Virtual Global Institute and Visionary Awards Celebration.

Collins, a partner in the firm’s tax practice who focuses on tax matters related to project finance, began the session by summarizing some of the past year’s challenges, from the pandemic itself to extreme weather events and energy-price volatility. She then opened up the conversations to ask these essential questions.

1. What is the impact of the pandemic and investments into the renewable energy arena?

“How have these types of events impacted your business and the way that you’re investing?” Collins asked panelists Samantha Buechner, who works in renewable energy and environmental finance at Wells Fargo; Claire Sieuzac of the renewable power group at Goldman Sachs; and Corinne Still, a principal at Apollo Global Management.

The answers to her query proved complex and, sometimes, unexpected.

While the reasons for the tidal wave of interest in renewables are varied, the surge came amid an economic shutdown that heightened speculation and concern about the effects of the fossil fuel industry on the planet.

Many finance professionals were surprised by the agility of markets during the period. The rapid growth has led to a wealth of new power projects, which is contributing to a decline in renewable energy prices that lowers shareholder returns. The returns remain competitive, however, thanks in part to the effect of lower interest rates intended to buoy the global economy during the pandemic.

2. How will the financing of these matters change in the future?

Capital remains readily available for the largest and most expensive projects, but those in the lower- and middle-market tiers can find it more difficult to secure funding, participants noted.

The Biden administration’s proposal for a temporary “direct pay” option on tax credits, meanwhile, has the potential to shake up the status quo for financing environmentally friendly projects and may provide needed capital for renewable developers who would otherwise depend on so-called tax equity financing to capture the full federal tax benefits.

There are other proposed changes to U.S. tax law that would directly impact renewable financing. Until such changes are enacted, it is difficult for financiers and project investors to plan ahead, though any expansion of renewable energy tax benefits would ultimately be a shot in the arm for the industry, participants said.

3. What role should board members play in the development of renewables?

For corporate board members, the expansion in renewables will require steering management toward developing a holistic vision of energy options, financing sources and pricing that will enable companies to choose the most effective and cost-efficient options.

As the industry and its opportunities grow and transform, clients may best prepare by diversification. Participants agreed that if companies keep their fingertips on all the options, they can pivot nimbly when needed.

This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.