Interview
ESG Roadmap: The Utilities Sector
- Investors are advised to monitor specific environmental, social, and governance (ESG) issues, including data-monitable and non-monitable risks, over the next 18 to 24 months.
- Utility decarbonization is projected to be a lengthy process, causing persistent air pollution and waste issues for an extended duration, with significant water use and quality concerns likely to remain even after these efforts conclude.
- Substantial investment is anticipated for renewable energy and infrastructure modernization, particularly in the United States where the aging grid presents high upgrade costs.
- Future viability faces uncertainty regarding consumer willingness to pay for renewable energy and regulatory decisions on passing these costs to ratepayers.
- The expansion of distributed generation, such as residential and commercial solar, is expected to shift grid investment costs to other users, raising fairness concerns.
- Utilities are likely to face pressure to maintain affordable pricing and implement favorable payment programs to prevent disconnections during widespread crises like the pandemic, rather than just localized natural disasters.
- The investment climate for nuclear power is currently weak, and declining costs for solar and wind may further reduce its long-term viability.
- A lack of nuclear utilization could necessitate reliance on fossil fuels for a longer period, resulting in increased near-term emissions.
- Cyberattack risks are projected to escalate daily as the sector integrates smart grids, smart metering, and the internet of things.
- Increased transparency regarding political lobbying, political involvement, and tax payments is expected to mitigate reputational, financial, and regulatory risks.