Markets In Action

Why Companies Are Betting Big on Clean Energy

Tech. Retail. Hospitality.

These are just a few of the sectors in which firms are investing in clean energy as part of their overall business strategies — and capital markets are key to making that possible.

Bonds have the potential to be a transformative driver of clean energy progress in America — and “perhaps at levels in the tens of billions of dollars in the next several years,” according to a Brookings-Rockefeller Project on State and Metropolitan Innovation study. “Bonds, as the bedrock of infrastructure finance, have long funded the nation’s bridges, roads, airports, public libraries, hospitals and university expansions. Using bonds in new ways, states and regions can lead the way in a new era of clean energy finance that reduces the cost of capital and financial risk,” the report said.

Companies are investing to support innovative sustainable energy initiatives. Google, for example, in partnership with SunPower Corporation, has committed to investing $100 million into a fund that will lease residential solar installations, as reported by Bloomberg.

While Google may not be the first company that comes to mind when you think of solar panels, it is a big-time player in the growing trend of major companies making investments in clean, renewable energy.

Google is tapping into solar, wind and other alternative energy sources to keep its data centers and server farms humming. CNBC reports that Google is aggressively investing in green technology in an effort to save on energy costs.

“We’ve invested over a billion dollars in 15 projects that have the capacity to produce two gigawatts of power around the world, mostly in the U.S.” said Rick Needham, Google’s director of energy and sustainability. “[T]hat’s the equivalent of Hoover’s Dam worth of power generation.”

International Investments

Worldwide investment in clean energy reached $47.7 billion in the first quarter of 2014. That is almost a 10 percent increase over the same period last year, according to Bloomberg New Energy Finance.

The real story is not the amount of investments in clean energy, it’s about the companies accessing the capital markets to get the funding they need to grow and create jobs. Take Tesla Motors, for example. The company was able to access the capital markets to raise some of the capital needed to build a new battery plant, which will ultimately put more than 6,000 Americans to work. This was made possible through the sale of convertible bonds, which allowed Tesla Motors to finance $2 billion of the $5 billion needed to build the new plant.

Researchers like McKinsey & Company point to the potential of renewable energy. Industry watchers are seeing clean-energy investments in sectors from mining and defense to hospitality and telecommunications — and the bottom line is that these companies know the impact they can have in the marketplace.

“Why are companies doing such things?” McKinsey analysts ask in the company’s report. “To diversify their energy supply, save money and appeal to consumers.”