In a state of rampant evolution, the energy sector is now focused on making cleaner energy. Sweeping transformations are underway, changes that will make us always better able to meet the expectations of consumers and care for the planet, a desire that has been bolstered by ratification of the Paris Agreement at COP 21 in 2015. Here, we take a look at what this means with Stéphane Voisin, a financial analyst and specialist in sustainable finance and socially responsible investment.
What impact can the trends identified by ENGIE – decarbonation, decentralization, and digitalization (the 3 “Ds”) – have on the energy and services sector? Are investors following these trends?
The energy world is experiencing a rapid transformation, and today it is finding its business model disrupted. Bolstered by the ratification of the Paris Agreement at the COP 21 in 2015, for the energy sector the challenge now lies in producing carbon neutral energy and, more generally, maintaining the sustainability of its business model. Digitalization comes with plenty of opportunities, and enables new services to be developed for householders, businesses, and governments, etc. Organizations can now access data on customer energy use and analyze it to optimize energy efficiency. Thus, the challenge of the future will be to offer energy efficiency solutions and low carbon energy at the best possible price. Very recently, Mexico launched a “technology neutral” call for tender, the only selection criteria being based on cost vs. effectiveness, not the source of the energy. Renewable energies are becoming increasingly competitive – overtaking carbon energies – and solar power won the tender!
In parallel, consumers are increasingly concerned with the traceability of the energy they use. This is of particular interest to ENGIE as it incorporates the 3 Ds. Traceability of “green” energy is desirable from a decarbonation standpoint, and is also made possible through digitalization, especially blockchain technology. In France, ENGIE is also looking at using the blockchain to optimally manage energy use and maintenance. The blockchain also plays a role in decentralization: consumers now have a strong expectation of locally produced energy, as they show increasing affinity with slow money, slow food, and slow energy. In New York, for example, the Brooklyn Microgrid lets users locally and independently manage their own electricity network using Ethereum. Surplus electricity can be sold to your neighbors through secure transactions.
This global commitment to decarbonation and slow energy may also lead to a fall in energy use which may have an impact on industrial players in the energy sector. The challenges of providing access to energy for all then becomes a fundamental one if we are to secure the market’s future, all the more so given that investors, too, have a close eye on the vectors for growth that this represents for the energy sector. Industry will have to support the development of regions with no energy supply, and work to meet their growing needs, just like ENGIE has done with its PowerCorner program. This initiative – developed by Group companies and employees still at the incubator stage – provides rural communities in northern Tanzania with access to electricity thanks to a dedicated production unit and microgrid.
Do you think that integrated reporting is important for a Group like ENGIE? Do you see a trend of adoption by investors?
Most investors want to obtain a vision of the company’s future. With the development of integrated thinking, we are witnessing a paradigm shift in that it provides a way to reconcile environmental, societal, and financial strategies. It redefines reporting to place a greater emphasis on overall, long term value creation. Furthermore, the Assessing low Carbon Transition (ACT) initiative, launched by the Carbon Disclosure Project and the French Environment Agency (ADEME), provides incentives for businesses to fully commit to the energy transition in their business. This provides a forecast, a scientific vision of the carbon footprint as an absolute value, rather than a relative one. The challenge for a Group like ENGIE goes beyond publishing its carbon footprint, it includes showing its stakeholders what it is doing to help the world stay within a 2°C temperature increase. It is this vision which will bring finance and CSR into alignment.