As world leaders prepare to gather at the COP26 climate summit in Glasgow on 31 October – 12 November 2021, disruptions to global energy markets that have led to price surges and power shortages in parts of the world have focused attention on the delicate balance policymakers must strike between decarbonisation and energy security as they work to set the global economy on a path to net zero emissions.
Beyond COP26, we expect the focus will quickly shift to how global policymakers plan to deliver on targets to reach net zero emissions. Although many of the world’s largest economies have now announced ambitious net zero targets – with the latest major commitments coming from Russia, Saudi Arabia, and the United Arab Emirates – businesses and investors will want to see detailed roadmaps on how they intend to achieve these long term climate goals. We expect a key pillar of these plans will be how to manage the energy transition within their respective economies.
Broadly, the energy transition refers to the shift away from the production and use of fossil fuels such as oil, natural gas and coal to less polluting and renewable energy sources such as solar and wind, as well as expansion of supporting infrastructure such as electrical grids, batteries and other technologies for energy storage.
Underlying this shift is the urgent need to reduce greenhouse gas emissions released when fossil fuels are burned, to limit global warming.
Worldwide, energy transition spending reached a record USD501 billion in 2020 despite the pandemic, according to BloombergNEF data.
Increase in Global Spending on the Energy Transition
We expect this to accelerate further, and we see new opportunities emerging in clean energy, green technologies and enabling infrastructure such as electric vehicles, wind generation and hydrogen fuels for years to come.
However, recent disruptions to global energy markets that have resulted in surging energy prices in Europe and widespread power shortages in China serve as a powerful reminder that this transition is complex and must be carefully managed by global policymakers.
Even as the world moves towards net zero emissions, “ensuring adequate supplies of both fossil fuels and low emissions fuels is essential to maintain energy security and reduce price volatility during energy transitions”, the International Energy Agency (IEA) said in its latest World Energy Outlook report.
Our view is that the disruptions will not derail the energy transition. Indeed, the pain inflicted by the current energy crisis may spur policy changes that encourage an even more rapid transition to clean energy over the next decade.
Notwithstanding emergency measures taken to ease energy shortages in China and Europe, we expect to see a progressive shift away from new investment in fossil fuels, and a significant increase in investment in renewable energy sources.
In China, President Xi Jinping recently pledged to accelerate the development of wind and solar power in a mid-October 2021 speech, adding that construction had begun on a 100 million kilowatt wind and solar power project. Separately, China’s National Development and Reform Commission said that it would liberalise the current electricity pricing framework, allowing power producers to pass on higher costs to industrial and commercial users. Though this would likely increase production – and thus emissions – in the short term, the pass-through of higher costs to end users is likely to moderate longer term energy consumption.
We expect the rapid decline in the cost of renewable energy over the past decade to drive increasingly widespread adoption of clean technologies. Among newly commissioned projects, the cost of utility-scale solar photovoltaic electricity generation fell by 85% to USD0.057 per kilowatt hour (kWh) in 2020 from USD0.381/kWh in 2010, based on the global weighted average levelised cost of energy used to compare different methods of electricity generation, according to a recent report by the International Renewable Energy Agency (IRENA). Over the same period, the cost of electricity from onshore wind projects fell by 56% to USD 0.039/kWh from USD0.089/kWh.
Global Additions of Renewable Generation Capacity
Source: International Renewable Energy Agency (IRENA).
A record 260 gigawatts (GW) of renewable generation capacity was added globally in 2020, despite the shock from the pandemic.
Solar and wind are already the cheapest source of new bulk electricity generation in countries representing over two-thirds of the world population, three-quarters of global GDP and 90% of electricity demand, according to an analysis by BloombergNEF.
This year, renewables are expected to account for 70% of the USD530 billion spent on all new generation capacity in 2021, according to IEA projections.
Overall, the energy transition over the coming decade is likely to be highly non-linear, as increasingly robust climate policies intersect with technological advancements and falling costs to propel low-carbon alternatives to the forefront across a wide range of economic activity, triggering a cascade of tipping points in industry adoption and rapid shifts in consumer behaviour.
The transition to renewable and low-carbon energy sources lies at the heart of global efforts to set the global economy on a path to net zero emissions by mid-century for two key reasons:
Decarbonising the power sector will likely involve a mix of policy initiatives introduced progressively over the coming decade, including phasing out coal production, ending fossil fuel subsidies, and the further expansion of carbon pricing schemes globally.
Across multiple sectors of the economy, businesses are increasingly positioning themselves for this energy transition.
At the forefront of the transition, many utilities and other energy firms are pivoting towards renewables or increasing their renewable energy portfolios.
In property, some companies are increasingly competing to burnish their green credentials by developing buildings with lower carbon footprints and greater energy efficiency.
In other sectors such as technology, businesses are paying more attention to heightened regulatory risk, as well as opportunities to develop and support the energy transition, including developing software and automation systems to reduce wastage and improve energy efficiency in buildings or manufacturing facilities.
We expect investments in clean technologies to drive improvements that expand commercial deployment opportunities across multiple sectors of the economy, attracting more investment that leads to further technological advancements –creating a virtuous circle that accelerates the energy transition over the coming years.
Today, spending on wind and solar energy deployment produces four times more electricity than the same amount of spending on such technologies a decade ago, due to rapid improvements and cost reductions, according to the latest IEA assessment.
To speed up the energy transition and decarbonisation of the global economy, we believe that policymakers will also progressively impose higher costs on carbon emissions over the coming decade.
Currently, there are over 60 carbon pricing initiatives worldwide, covering an estimated 21.5% of global greenhouse gas emissions, according to World Bank data.
Embedding the cost of carbon pollution into business and investment decisions will provide a much-needed boost to global efforts to align economic activity worldwide with climate goals.
Today, global carbon emissions from fossil fuel use and industry remain a long way from net zero, despite last year’s decline due to the Covid-19 pandemic. Indeed, with the reopening of the global economy, emissions have rebounded. Energy-related carbon emissions from the G20 group of the world’s largest rich and emerging economies are expected to rise 4% this year, after declining 6% in 2020 due to the pandemic, according to the G20’s latest Climate Transparency Report published on 14 October 2021.
“Rebounding emissions across the G20, the group responsible for 75% of global greenhouse gas emissions, shows that deep and fast cuts in emissions are now urgently needed to achieve net zero announcements,” said Gahee Han, one of the report’s lead authors.
Almost half of this year’s surge in G20 emissions is being driven by the power sector. In 2021, emissions from the power sector are projected to rebound by 5% due to increased demand, after falling 5% in 2020. The power sector accounts for the biggest share (38%) of G20 energy-related CO2 emissions, with fossil fuels such as coal, natural gas and oil used for 60% of electricity needs, according to the report.
Our longstanding view is that global efforts to pursue sustainable, climate-resilient development paths and mitigate the threat of climate change will drive profound structural changes to the global economy for years to come, creating both significant disruption and new opportunities for businesses.
We continue to advocate a prudent strategy of adding diversified exposure to a wide range of potential beneficiaries of the global transition to a carbon neutral economy, given the all-encompassing nature of decarbonisation efforts worldwide, and the fast-evolving and uneven rollout of supporting policies and regulations across the world.
Global Energy Supply Investment (by sector)
This product may only be offered: (i) in Hong Kong, to qualified Private Banking Customers and Professional Investors (as defined under the Securities and Futures Ordinance); and (ii) in Singapore, to Accredited Investors (as defined under the Securities and Futures Act) and (iii) in the Dubai International Financial Center to Professional Clients (as defined under the Dubai Financial Services Authority rules) only. No other person should act on the contents of this document.
This product may involve derivatives. Do NOT invest in it unless you fully understand and are willing to assume the risks associated with it. If you have any doubt, you should seek independent professional financial, tax and/or legal advice as you deem necessary.
Please carefully read and make sure that you understand all Risk Disclosures, Selling Restrictions, and Disclaimers. This document must be read together with the relevant Prospectus & Offering Documents &/or Key Fact Statement.
This document is prepared by Bank of Singapore Limited (Co Reg. No.: 197700866R) (the “Bank”), is for information purposes only, and is not, by itself, intended for anyone other than the recipient. It may contain information proprietary to the Bank which may not be reproduced or redistributed in whole or in part without the Bank’s prior consent. It is not an offer or a solicitation to deal in any of the investment products referred to herein or to enter into any legal relations, nor an advice or by itself a recommendation with respect to such investment products. It does not have regard to the specific investment objectives, investment experience, financial situation and the particular needs of any recipient or customer. Customers should exercise caution in relation to any potential investment. Customers should independently evaluate each investment product and consider the suitability of such investment product, taking into account customer’s own specific investment objectives, investment experience, financial situation and/or particular needs. Customers will need to decide on their own as to whether or not the contents of this document are suitable for them. If a customer is in doubt about the contents of this document and/or the suitability of any investment products mentioned in this document for the customer, the customer should obtain independent financial, legal and/or tax advice from its professional advisers as necessary, before proceeding to make any investments.
The Bank, its Affiliates and their respective employees are not in the business of providing, and do not provide, tax, accounting or legal advice to any clients. The material contained herein is prepared for informational purposes and is not intended or written to be used, and cannot be used or relied upon for tax, accounting or legal advice. Any such client is responsible for consulting his/her own independent advisor as to the tax, accounting and legal consequences associated with his/her investments/transactions based on the client’s particular circumstances.
This document and other related documents have not been reviewed by, registered or lodged as a prospectus, information memorandum or profile statement with the Monetary Authority of Singapore nor any regulator in Hong Kong or elsewhere.
This document may not be published, circulated, reproduced or distributed in whole or in part to any other person without the Bank’s prior written consent. This document is not intended for distribution to, publication or use by any person in any jurisdiction outside Singapore, Hong Kong, or such other jurisdiction as the Bank may determine in its absolute discretion, where such distribution, publication or use would be contrary to applicable law or would subject the Bank and its related corporations, connected persons, associated persons and/or affiliates (collectively, “Affiliates”) to any registration, licensing or other requirements within such jurisdiction.
Investments in financial instruments or other products carry significant risk, including the possible loss of the principal amount invested. Financial instruments or other products denominated in a foreign currency are subject to exchange rate fluctuations, which may have an adverse effect on the price or value of an investment in such products. No liability is accepted by the Bank for any loss (whether direct, indirect or consequential) that may arise from any use of the information contained in or derived from this document. Past performance is not a guarantee or indication of future results. Any prices provided in this document (other than those that are identified as being historical) are indicative only and do not represent firm quotes as to either price or size. You should contact your local representative directly if you are interested in buying or selling any financial instrument or other product or pursuing any trading strategy, investment strategy or wealth planning structure that may be mentioned in this document.
While reasonable efforts have been made to ensure that the contents of this document have been obtained or derived from sources believed by the Bank and its Affiliates to be reliable, neither the Bank nor its Affiliates has independently verified the accuracy of such source(s). The Bank and its Affiliates and their respective officers, employees, agents and representatives do not make any express or implied representations, warranties or guarantees as to the accuracy, timeliness or completeness of the information, data or prevailing state of affairs that are mentioned in this document and do not accept any liability for any loss or damage whatsoever, direct or indirect, arising from or in connection with the use of the contents of this document.
The Bank and its Affiliates may have issued other reports, analyses, or other documents expressing views different from the contents hereof and all views expressed in all reports, analyses and documents are subject to change without notice. The Bank and its Affiliates reserve the right to act upon or use the contents hereof at any time, including before its publication herein.
The author of this document may have discussed the information contained therein with others within or outside the Bank and the author and/or such other Bank personnel may have already acted on the basis of this information (including communicating the information contained herein to other customers of the Bank). The Bank, its personnel (including those with whom the author may have consulted in the preparation of this communication), and other customers of the Bank may be long or short the financial instruments or other products referred to in this document, may have acquired such positions at prices and market conditions that are no longer available, and may have interests different from or adverse to your interests. The persons providing the information to you may receive commissions, fees, rebates or other non-monetary benefits from any counterparty, broker, agent or another affiliate of the OCBC Group or any other party in respect of any trades or transactions effected for you including in relation to the investments referred to herein.
Bank of Singapore Limited is a licensed bank regulated by the Monetary Authority of Singapore in Singapore. Bank of Singapore Limited, Hong Kong Branch, is an Authorized Institution as defined in the Banking Ordinance of Hong Kong (Cap 155), regulated by the Hong Kong Monetary Authority in Hong Kong and a Registered Institution as defined in the Securities and Futures Ordinance of Hong Kong (Cap.571) regulated by the Securities and Futures Commission in Hong Kong. Bank of Singapore Limited, its employees and discretionary accounts managed by its Singapore Office may have long or short positions or may be otherwise interested in any of the investment products (including derivatives thereof) referred to in this document and may from time to time dispose of any such investment products. Bank of Singapore Limited forms part of the OCBC Group (being for this purpose Oversea-Chinese Banking Corporation Limited and its subsidiaries, related and affiliated companies). OCBC Group, their respective directors and/or employees (collectively “Related Persons”) may or might have in the future interests in the investment products or the issuers mentioned herein. Such interests include effecting transactions in such investment products, and providing broking, investment banking and other financial services to such issuers. OCBC Group and its Related Persons may also be related to, and receive fees from, providers of such investment products.
Bank of Singapore Limited adheres to a group policy (as revised and updated from time to time) that provides how entities in the OCBC Group manage or eliminate any actual or potential conflicts of interest which may impact the impartiality of research reports issued by any research analyst in the OCBC Group.
Past performance is not always indicative of likely or future results. The value of any investment or income may go down as well as up. All investments involve an element of risk, including capital loss. Customers who are interested to invest in such investment products should read the risk disclosures and governing terms and conditions that are set out in the relevant offering documents.
Dual currency investments, structured deposits and other investment products are not insured by the Singapore Deposit Insurance Corporation or the Hong Kong Deposit Protection Scheme.
Applicable to clients booked and/or managed in the Dubai International Financial Center (DIFC) only: The information contained herein is exclusively addressed to the recipient. The offering of certain products in this document has not been and will not be registered with the Central Bank of United Arab Emirates or Securities & Commodities Authority in the United Arab Emirates. Any products in this document that are being offered or sold do not constitute a public offering or distribution of securities under the applicable laws and regulations of the United Arab Emirates. This document is not intended for circulation or distribution in or into the UAE, other than to persons in the UAE to whom such circulation or distribution is permitted by, or is exempt from the requirements of, the applicable laws and regulations of the United Arab Emirates. The distribution of the information contained herein by the recipient is prohibited. Where applicable, this document relates to securities which are listed outside of the Abu Dhabi Securities Exchange and the Dubai Financial Market. Bank of Singapore Limited is not authorized to provide investment research regarding securities listed on the exchanges of the United Arab Emirates which are outside of the DIFC.
Hong Kong SAR: Bank of Singapore Limited is an Authorized Institution as defined in the Banking Ordinance of Hong Kong (Cap 155), regulated by the Hong Kong Monetary Authority in Hong Kong and a Registered Institution as defined in the Securities and Futures Ordinance of Hong Kong (Cap. 571), regulated by the Securities and Futures Commission in Hong Kong. This document is for information only and is not intended for anyone other than the recipient. It has not been reviewed by any regulatory authority in Hong Kong. It is not by itself an offer or a solicitation to deal in any of the financial products referred to herein or to enter into any legal relations, nor an advice or a recommendation with respect to such financial products. It does not have regard to the specific investment objectives, financial situation, investment experience and the particular needs of any recipient or Investor. This document may not be published, circulated, reproduced or distributed in whole or in part to any other person without the Bank’s prior written consent. This document is not intended for distribution to, publication or use by any person in any jurisdiction outside Hong Kong, or such other jurisdiction as the Bank may determine in its absolute discretion, where such distribution, publication or use would be contrary to applicable law or would subject the Bank and its related corporations, connected persons, associated persons and/or affiliates to any registration, licensing or other requirements within such jurisdiction. Indonesia: The offering of the investment product in reliance of this document is not registered under the Indonesian Capital Market Law and its implementing regulations, and is not intended to constitute a public offering of securities under the Indonesian Capital Market Law and its implementing regulations. According, this investment product may not be offered or sold, directly or indirectly, within Indonesia or to citizens (wherever they are domiciled or located), entities or residents, in any manner which constitutes a public offering of securities under the Indonesian Capital Market Law and its implementing regulations. Japan: The information contained in this document is for general reference purposes only. It does not have regard to your specific investment objectives, financial situation, risk tolerance and particular needs. Nothing in this document constitutes an offer to buy or sell or an invitation to offer to buy or sell or a recommendation or a solicitation to buy or sell any securities or investment. We do not have any intention of conducting regulated business in Japan. You acknowledge that nothing in this document constitutes investment or financial advice or any advice of any nature. Malaysia: Bank of Singapore Limited does not hold any licence, registration or approval to carry on any regulated business in Malaysia (including but not limited to any businesses regulated under the Capital Markets & Services Act 2007 of Malaysia), nor does it hold itself out as carrying on or purport to carry on any such business in Malaysia. Any services provided by Bank of Singapore Limited to residents of Malaysia are provided solely on an offshore basis from outside Malaysia, either as a result of “reverse enquiry” on the part of the Malaysian residents or where Bank of Singapore Limited has been retained outside Malaysia to provide such services. As an integral part of the provision of such services from outside Malaysia, Bank of Singapore Limited may from time to time make available to such residents documents and information making reference to capital markets products (for example, in connection with the provision of fund management or investment advisory services outside of Malaysia). Nothing in such documents or information is intended to be construed as or constitute the making available of, or an offer or invitation to subscribe for or purchase any such capital markets product. Myanmar: This document and information herein is made available by Bank of Singapore Limited, which is not licensed or registered under the Financial Institutions Law (Law No. 20/2016) or other Myanmar legislation to carry on, nor do they purport to carry on, any regulated activity in Myanmar. The provision of any products and services by Bank of Singapore Limited shall be solely on an offshore basis. You shall ensure that you have and will continue to be fully compliant with all applicable laws in Myanmar when entering into discussion or contracts with Bank of Singapore Limited. Oman: This document does not constitute a public offer of investment, securities or financial services in the Sultanate of Oman, as contemplated by the Commercial Companies Law of Oman (Royal Decree No. 4/1974), Banking Law of Oman (Royal Decree No. 114/2000) or the Capital Market Law of Oman (Royal Decree No. 80/1998) and the Executive Regulations of the Capital Market Law (Ministerial Decision No. 1/2009) or an offer to sell or the solicitation of any offer to buy non-Omani investment products, securities or financial services and products in the Sultanate of Oman. This document is strictly private and confidential. It is being provided to a limited number of sophisticated investors solely to enable them to decide whether or not to make an offer to invest in financial products mentioned in this document, outside of the Sultanate of Oman, upon the terms and subject to the restrictions set out herein and may not be reproduced or used for any other purpose or provided to any person other than the original recipient. Additionally, this document is not intended to lead to the making of any contract within the territory or under the laws of the Sultanate of Oman. The Capital Market Authority of Oman and the Central Bank of Oman take no responsibility for the accuracy of the statements and information contained in this document or for the performance of the financial products mentioned in this document nor shall they have any liability to any person for damage or loss resulting from reliance on any statement or information contained herein. Russia: The investment products mentioned in this document have not been registered with or approved by the local regulator of any country and are not publicly distributed in Singapore or elsewhere. This document does not constitute or form part of an offer or invitation to the public in any country to subscribe for the products referred to herein. South Korea: The document does not constitute an offer, solicitation or investment advertisement to trade in the investment product referred to in the document. Taiwan: The provision of the information and the offer of the service concerned herewith have not been and will not be registered with the Financial Supervisory Commission of Taiwan pursuant to relevant laws and regulations of Taiwan and may not be provided or offered in Taiwan or in circumstances which requires a prior registration or approval of the Financial Supervisory Commission of Taiwan. No person or entity in Taiwan has been authorised to provide the information and to offer the service in Taiwan. Thailand: Please note that neither Bank of Singapore Limited nor any other entities in the Bank of Singapore Limited’s group maintains any licences, authorisations or registrations in Thailand nor is any of the material and information contained, or the relevant securities or products specified herein approved or registered in Thailand. Interests in the relevant securities or products may not be offered or sold within Thailand. The attached information has been provided at your request for informational purposes only and shall not be copied or redistributed to any other person without the prior consent of Bank of Singapore Limited or its relevant entities and in no way constitutes an offer, solicitation, advertisement or advice of, or in relation to, the relevant securities or products by Bank of Singapore Limited or any other entities in Bank of Singapore Limited’s group in Thailand. The Philippines: The information contained in this document is not intended to constitute a public offering of securities under the Securities Regulation Code of the Philippines. Dubai International Financial Center (DIFC): Bank of Singapore Limited has a branch registered in the Dubai International Financial Centre ("DIFC") which is regulated by the Dubai Financial Services Authority (“DFSA”). Bank of Singapore Limited (DIFC Branch) is not a financial institution licensed in the United Arab Emirates outside of the DIFC and does not undertake banking or financial activities in the United Arab Emirates nor is it licensed to do so outside of the DIFC. This material is provided for information purposes only and it is general information not specific in any way to any particular investor, investor type, strategy, investment need or other financial circumstance. As such this information is not financial advice or a financial promotion, nor is it intended to influence an investor's decision to invest. It is not to be construed as an offer to buy or sell or solicitation of an offer to buy or sell any financial instruments or to participate in any particular trading strategy in any jurisdiction. The material is only intended for persons who fulfill the criteria to be classified as “Professional Clients” as defined under the DFSA rules and should not be reviewed, received, provided to or relied upon by any other person. United Arab Emirates (U.A.E): The information contained herein is exclusively addressed to the recipient. The offering of certain products in this document has not been and will not be registered with the Central Bank of United Arab Emirates or Securities & Commodities Authority in the United Arab Emirates. Any products in this document that are being offered or sold do not constitute a public offering or distribution of securities under the applicable laws and regulations of the United Arab Emirates. This document is not intended for circulation or distribution in or into the UAE, other than to persons in the UAE to whom such circulation or distribution is permitted by, or is exempt from the requirements of, the applicable laws and regulations of the United Arab Emirates. The distribution of the information contained herein by the recipient is prohibited. Where applicable, this document relates to securities which are listed outside of the Abu Dhabi Securities Exchange and the Dubai Financial Market. The Bank of Singapore Limited is not authorized to provide investment research regarding securities listed on the exchanges of the United Arab Emirates which are outside of the DIFC. United Kingdom: In the United Kingdom, this document is being made available only to the person or the entity to whom it is directed being persons to whom it may lawfully be directed under applicable laws and regulations of the United Kingdom (such persons are hereinafter referred to as ‘relevant persons’). Accordingly, this document is communicated only to relevant persons. Persons who are not relevant persons must not act on or rely on this document or any of its contents. Any investment or investment activity to which this document relates is available only to relevant persons and will be engaged in only with relevant persons. Relevant persons in receipt of this document must not distribute, publish, reproduce, or disclose this document (in whole or in part) to any person who is not a relevant person. United States of America: This product may not be sold or offered within the United States or to U.S. persons.
Brunei: This document has not been delivered to, licensed or permitted by the Autoriti Monetari Brunei Darussalam, the authority as designated under the Brunei Darussalam Securities Markets Order, 2013 and the Banking Order, 2006; nor has it been registered with the Registrar of Companies, Registrar of International Business Companies or the Brunei Darussalam Ministry of Finance. The products mentioned in this document are not registered, licensed or permitted by the Autoriti Monetari Brunei Darussalam or by any other government agency or under any law in Brunei Darussalam. Any offers, acceptances, sales and allotments of the products shall be made outside Brunei Darussalam.