Socially responsible or reprehensible? Investors, electricity utility companies, and transformative change in Europe
Abstract The overwhelming reliance of modern society based fossil-based non-renewable sources of energy production represent a major challenge to sustainability. Moving towards a new more sustainable generation mix affects investments on electricity utility companies. This presents a dual challenge for companies: 1) the electricity generation mix decision; and 2) their future access to and cost of capital. This research focuses on the role that investors have in developing new more sustainable generation mix models. Five semi-structured interviews were conducted with investors working at a major European asset manager company. The interviewees highlighted the integration of renewable technologies as a key challenge to the viability of the utilities in the future. Other key challenges included a rising carbon price, greater decoupling of energy use and GDP growth, policy constraints and uncertain regulatory frameworks, lack of relevant core competencies to innovate in their business models, the integration of renewable energy into their own generation mixes and the grid, the role of new technologies, and a lack of urgency from top management. The findings indicate that investors play a key role in shaping electricity generation mixes, where the principal, agents, and clients must be willing to develop and adopt more sustainable generation mix models. Highlights Climate change is forcing electricity utility companies to become more sustainable. Energy utility companies must balance the generation mix and access to capital. Investors are questioning the sustainability activities of energy utility companies. Agency theory helps explain the role of asset managers in sustainability investing. Companies that do not change their generation mix will not have access to capital. Graphical abstract [DISPLAY OMISSION]
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