In the last six months, many governments have proclaimed support for nuclear energy and industrial companies have announced partnerships with nuclear developers to meet their decarbonization commitments—but the most exciting evolution, arguably, involves nuclear’s relationship with three letters: E-S-G.
Environmental, Social, and Governance (ESG) refers to the increasingly relevant non-financial criteria used by financiers when screening their new investments in order to encourage more sustainable and thoughtful practices.
Some examples of environmental factors include carbon emissions and the impact on humans’ physical health and wellbeing. Social considerations may cover employment or diversity and inclusion measures, while governance screens may look at procedures an industry or company employs to maintain safety or efficiency.
We’ve seen a big momentum shift in the financial community toward nuclear, and that’s due to a realization that we need nuclear power in order to meet our simultaneous climate and reliability goals.
According to a new report by the Center for ESG and Sustainability (CESG), in partnership with Columbia University’s International Research Institute for Climate and Society, nuclear energy is a strong performer when analyzed against these ESG standards. In addition to its carbon-free footprint, nuclear energy also generates reliable, always-on power with less land and water usage than other energy generators.
Nuclear’s resiliency during extreme weather events, ability to support local economies with high-paying jobs, and positive engagement with nearby communities makes it a solid performer against social factors.
Governance considerations are also met by the nuclear industry via its dedication to strict safety standards and a diverse and inclusive workforce.
Governments are recognizing nuclear’s strong performance as they continue to codify their sustainable taxonomies. In July, the European Union (EU) voted to formally include nuclear energy in its EU Taxonomy, and South Korea included nuclear in a draft of their K-Taxonomy just last month. Canada’s Ontario Power Generation (OPG) added nuclear to its green bond framework, and Canada Investment Bank this week committed $970 million to develop Canada’s first small modular reactor at OPG’s Darlington site.
But the world is seeing the promise of nuclear power even without the deserved ESG recognition.
In 2016, Morgan Stanley released a report on an investment strategy called “Fossil Fuel Aware Investing,” advising investors to reduce or eliminate their exposure to companies producing energy through coal, oil-and-gas, or nuclear energy—even though nuclear energy is carbon-free. In a stunning reversal earlier this year, Morgan Stanley called nuclear energy a “safe, reliable, and carbon-free source of energy.” And they’re not the only ones on Wall Street connecting the dots.
Brookfield Asset Management published a white paper in September analyzing the global trends toward nuclear energy, recognizing a “new dawn for nuclear power.” Earlier this month, U.S. nuclear power company, Westinghouse Electric, was sold to Brookfield Renewable Partners and Cameco in a $7.9 billion deal, signaling to other investors how ripe the investment opportunity is within the nuclear energy space.
And TerraPower recently announced a successful fundraise of $750 million, rounding out the top 10 venture capital deals made in the third quarter of this year.
Nuclear energy is front of mind for many in the financial community, including fund managers and investment bankers. Cowen Inc., for example, has an ongoing podcast series dedicated entirely to nuclear energy, where the Nuclear Energy Institute’s (NEI’s) President and CEO Maria Korsnick was interviewed for an episode on nuclear’s changing perception.
To showcase the growing excitement for nuclear that both the public and private sectors are experiencing, NEI and J.P. Morgan co-hosted a Nuclear Financing Summit in Washington earlier this week. The event gathered asset managers, CEOs and government ministers to learn more about nuclear energy as an investible ESG opportunity.
Advanced nuclear has the ability to be safe, reliable, and—we at Guggenheim believe—it’s going to be amongst the most affordable forms of power generation.
The world has a formidable path before it; one that includes daunting decarbonization pledges, looming deadlines, and intensifying climate events—but nuclear energy makes the path forward possible.
Extraordinary challenges often require extraordinary commitments, and the climate crisis is no exception. It’s imperative that the financial community and rating agencies recognize nuclear energy’s strong performance within ESG frameworks, in order to drive some of the trillions in international investment dollars toward game-changing, sustainable nuclear energy.
Source: NEI
