Climate change is creating some significant challenges for the renewable energy risk landscape, not just with respect to national and international regulatory responses but also other factors such as the potential for future litigation. There is a pressing need for risk managers to be aware of these challenges and to ensure that they are prioritised going forward. It will become increasingly important to be able to handle the changes being generated as climate change moves up the agenda - and there is a need to shift to more investment in low carbon and renewables - and also to be able to identify what this means for businesses and investors.
The challenges generated by climate change
The renewable risk landscape is already being impacted by a number of key challenges that are only likely to accelerate in the near future. This includes overcoming the barriers to scale that exist for renewable energy, as well as coping with the outcomes of regulatory scrutiny and potential legislative change. Climate change itself, as well as the focus on transitioning to low carbon initiatives and renewables, will transform the renewable energy risk landscape and mean that those working within it need to have a strong grasp of the way that change is happening. Being prepared for future litigation is also another essential part of this.
Changes to the market for renewables
Price increases from 2020 have caused a hardening of the insurance market, being driven in part by the desire of insurers to optimise on those increases to help push prices up further. Global markets have seen upward price shifts of 40% as well as significant casualty rating rises. These conditions mean risk mitigation strategies for renewables companies must now necessarily include consideration of the risks that are being generated by climate change. This should be accompanied by planning to develop a substantial environmental social governance footprint to help ensure that businesses can survive the current swathe of risks and challenges - whether that is coming from the COVID-19 pandemic or shifts in legal landscapes - and optimise positive movement.
Opportunities for Asia
Clean energy priority in Asian countries has the potential to create a significant advantage for businesses in this part of the world. Particularly as other jurisdictions are currently battling to contain COVID-19 and develop some sort of practical recovery plan there may be an opportunity for those areas where recovery has been faster to jumpstart economies and help to forge ahead in clean energy investment and development. China is a great example of where this could potentially happen - construction projects have begun to get under way again and even before the pandemic the country already had steady growth and investment in renewables. China’s 2020 “New Infrastructure' investment stimulation has also prioritised renewables, increasing both the flow of investment and innovation into this sector in the country.
From the pressure being created by environmental social governance requirements to the impact of future litigation, it’s essential for renewables businesses to be clear about how the energy transition that climate change requires is having an impact on the risk landscape for the sector and what kind of response is likely to be required.