What does financial market turmoil mean for low-carbon energy?
Mar 18, 2025
auto_awesome
Shanu Mathew, Senior VP at Lazard Asset Management, discusses the shift in institutional investment strategies towards energy amid market turmoil. Amy Myers Jaffe, Director at NYU's Energy, Climate Justice, and Sustainability Lab, shares insights on cleantech and low-carbon investment hurdles. They explore the departure of major oil companies from renewables, the connection between oil prices and cleantech funding, and the growing impact of data centers on energy demand. Their analysis questions whether the clean energy transition is slowing down or simply recalibrating.
Recent financial turmoil has made institutional investors cautious, prompting them to reevaluate their strategies in low-carbon energy investments.
The complications faced by clean energy technologies, such as economic viability and operational risks, are heightening scrutiny and hesitancy among stakeholders.
Despite current challenges in low-carbon investments, there remains medium-term optimism among investors about the potential of clean technologies in future energy transitions.
Deep dives
Current Trends in Energy Investment
Investment in the energy sector has experienced significant fluctuations recently, particularly in clean energy. The S&P 500 index has seen a decline of about 5% in 2025, while low-carbon energy companies have faced an even steeper drop, with low-carbon exchange-traded funds falling approximately 20% over the past year. This downturn has raised concerns regarding the overall climate for energy investments, with the conversation shifting to the implications of the energy transition and its effect on market performance. The struggles of the clean energy sector highlight a potential disconnect between ambitious decarbonization goals and the current economic viability of low-carbon technologies.
Challenges in Low-Carbon Energy Technologies
The podcast delves into the reality check surrounding low-carbon energy technologies, emphasizing the challenges of economic viability for projects such as hydrogen production. Major clean technology incidents, including battery fires and offshore wind accidents, have led to increased scrutiny of these technologies and their rollout. These incidents underscore the need for society to address the operational shortcomings and risks associated with new energy technologies. As a result, stakeholders are becoming more cautious about future investments in low-carbon areas, realizing that practical implementation is often fraught with complications.
Investment Outlook and Investor Sentiment
Despite a challenging near-term outlook for low-carbon investments, there remains a medium-term optimism among investors regarding the future of clean technologies. The historical performance of clean tech investments has been lackluster, underperforming in comparison to the broader energy sector and traditional energy investments. However, there is recognition that clean technologies will play a vital role in the energy transition and future economic growth. The important factor is when investors will regain confidence and willingness to allocate substantial capital into the sector amidst current challenges.
The Role of Major Oil Companies
The involvement of major oil companies in clean tech investments has been significant, with substantial capital allocations made to support innovative projects. Analysis shows that these companies have invested heavily in the clean technology sector, and their acquisitions reflect a broader strategy to transition towards low-carbon technologies. However, concerns persist regarding the oversight and effectiveness of these investments, especially as some companies, like BP, are reassessing their commitments to renewables amid shifting market dynamics. This underscores the complexity of achieving a successful transition while managing the expectations and profitability of traditional fossil fuels.
Long-Term Energy Transition Under Scrutiny
The traditional narrative surrounding energy transition is facing increased skepticism, with some experts suggesting that instead of a seamless transition to low-carbon sources, we may experience an addition of new technologies alongside existing fossil fuel infrastructure. This perspective emphasizes the importance of adaptability in developing energy systems that can respond to shifting demands while remaining viable. The global energy landscape is complex, with different regions pursuing distinct paths toward transition based on local conditions and needs. As stakeholders grapple with the realities of managing both short-term infrastructure challenges and long-term climate goals, a nuanced understanding of the energy sector's evolution becomes essential.
Investors have gone sour on clean energy. In a troubled time for stock markets in general, where is the capital for energy flowing now?
Host Ed Crooks is joined by Shanu Mathew, Senior VP and Portfolio Manager at Lazard Asset Management, and Amy Myers Jaffe, Director of the Energy, Climate Justice, and Sustainability Lab at NYU. Shanu returns to the show to break down how institutional investors, under pressure to deliver returns, are shifting strategies on energy. Amy shares insights on cleantech venture capital trends, and the factors that support investment in low-carbon solutions. With support for renewables under threat, and cutting-edge technologies facing mounting challenges, is the transition to low-carbon energy slowing down or recalibrating?
Meanwhile, Big Oil companies are changing course on their decarbonisation strategies and approaches to addressing climate change. BP and Shell are pulling back from power and renewables and emphasising oil and gas investments instead, after pressure from investors. Are they adapting to market realities, or are they abandoning clean energy too soon? And what will their strategic shift mean for the rest of the industry and for the climate? Amy discusses the close ties between oil prices and capital flows into cleantech.
Finally, there’s no end to the debate around AI’s evolving role in energy infrastructure. Electricity demand growth remains a dominant trend. The hyperscale data centre users, such as major tech firms, have emerged as key players in power demand. But trust issues persist between them and energy providers. The sector has a history of overestimating demand growth, leading to overbuilding. Are we in danger of going through that cycle all over again?
