Corporations are increasingly funding their own clean energy

Sustainable investment continues to charge on. Indeed, according to PwC, more than half of all planned ETF launches for 2022 are expected to be ESG tilted, including 80% of those in Europe. Expectations of investors alongside corporations continue to rise, alongside growing concerns about greenwashing.

Should companies step in the governments’ shoes?

Throughout the growth in focus on sustainability of corporations, there has been a dissenting argument that it is not for them to tackle society’s issues, but for governments and regulators. Furthermore, real sceptics of sustainability believe that most companies are just posturing for public consumption; it is a PR exercise and most of it is greenwashing. The Wall Street Journal recently published a series of articles arguing this point, i.e. that the ESG ‘craze’ distracts everyone from the work that really needs to be done by governments in taxing or regulating the things that we as society agree are good or bad.

For an American newspaper, this seems a laughable notion considering the fraught bipartisan politics of recent years in the US, not mentioning the long list of countries where degradation of environmental resources and human rights controversies go unseen. It also fails to recognise that companies are in fact already having a significantly positive impact through corporate policy, regardless of taxation or regulation regimes.

Companies are increasingly financing their own clean energy needs

One area where it is quite clear that corporations are making a difference, in markets such as the US where governments may not, is in climate change mitigation, and more specifically in funding growth of renewable energy. According to a BloombergNEF report published last week, in 2021 corporations globally purchased 31.1 GW of clean power through long-term contracts, largely driven by activity in the US and from large tech companies. Total signed volumes were equivalent to more than 10% of all the renewable energy capacity added globally last year.

The contracts they enter are either Power Purchase Agreements (or PPAs), contracting directly with renewable energy developers for a supply to be constructed to power operations in a certain location, or Virtual Power Purchase Agreements (VPPAs) which are fundamentally financial agreements tied to the output from a specific renewable electricity generating facility.

These decisions are mostly driven by net zero targets: companies are committing to emission reduction targets and as such cannot simply wait until the grid is decarbonised in every market in which they operate. Many of these companies are part of the RE100 campaign, committing to source 100% renewable energy for operations in every country. There are now over 350 organisations signed up to this pledge who consume 363TWh of electricity annually based on their latest filings – exceeding the U.K.’s entire power generation for the same year.

Another advantage: protection against price fluctuations

These contracts not only ensure that a company’s energy supply is low carbon, but they also provide protection from energy price fluctuations. With the energy price volatility of the last 12 months, it seems likely that we will see an acceleration of interest into these kinds of contracts. While renewable energy prices have marginally increased due to component inflation, they continue to be the most competitive option in most markets. According to BloombergNEF, the cost of running existing coal or gas-fired power plants doubled through 2021. With Brent oil prices also up nearly 50%, the economic option in most markets will be renewable energy.

A virtuous circle

There are also some interesting opportunities for this low-carbon impact to be circular. It was recently reported that Orsted has signed a memorandum of understanding (MoU) with steel producer Salzgitter to supply renewable hydrogen. It secures a low carbon energy supply for Salzgitter to develop low-carbon steel, which can then be supplied to Orsted for use in wind turbine construction to help them reach their own net zero emissions target by 2040.


The path to decarbonise the global power supply is likely to come with increased volatility in prices, as fossil fuel supply and demand are unlikely to adjust smoothly. In this environment, a committed source of low-cost renewable energy may become a competitive advantage, demonstrating again that a sustainable strategy should contribute to, not detract from, financial success.