Renewable energy firms face resilience challenge

Renewable energy firms are facing assaults from all sides as ESG and the need for firms to transition to a low carbon future test their resilience.

Broker Willis Towers Watson (WTW) has issued its annual Renewable Energy Market Review with its Head of Global Natural Resources warning the climate risks will impact the sector harder than the current pandemic.

“In these unprecedented times, the renewables industry finds itself beset by risks and challenges from all sides, as COVID-19 tightens its stranglehold on the global economy and insurance market conditions harden,” Graham Knight explained. “However, it is the issue of climate risk and ESG that will have a more significant impact on the future shape of the industry. Renewables companies must develop a significant ESG footprint and incorporate climate change risk into their risk mitigation strategies in order to survive in the future.”

He added: “Renewables companies need to know how the energy transition is going to affect their industry, why climate change is already transforming their industry risk landscape, how they can play a strategic role in developing their response to this transition and which ESG pressures are going to affect the industry in the future.””

Climate change and the subsequent transition to renewable energy and low-carbon initiatives, as well as the growing significance of Environmental Social Governance (ESG) pressures, will transform the renewable energy industry risk landscape, said the report.

“Key challenges brought on by climate change, including overcoming barriers to scale, regulatory scrutiny and potential future litigation, require that risk managers need to meet these challenges head on,” it warned.

Risk managers will need to navigate changes in regulation, technology and innovation, as well as translating what this means for their company and its investors, added WTW. Demonstrating improved ESG performance will help reduce cost of capital and enhance partnerships within industries and communities.

The increasing pressure to drive a sustainable future is driving growth in the renewable energy sector as companies look to transition to a low-carbon environment.

“At the same time, the renewables industry is faced with further insurance market hardening as insurers seek to capitalize on last year’s pricing increases to drive further improvements in pricing to restore this portfolio to profitability,” warned Mr Knight.