‘Massive untapped demand’: The $3 trillion opportunity ASX 200 energy shares could be missing

Group of children dressed in green hold up a globe relating to climate change.Group of children dressed in green hold up a globe relating to climate change.

S&P/ASX 200 Index (ASX: XJO) energy shares look to be missing out on some potentially game-changing funding.

ASX 200 energy shares, including AGL Energy Limited (ASX: AGL) and Origin Energy Ltd (ASX: ORG), alongside smaller energy shares outside the ASX 200 like Genex Power Ltd (ASX: GNX), are all working to transition toward cleaner and eventually wholly renewable energy sources.

Net zero by 2050 comes with a hefty price tag

According to Sohel Azad, an Islamic finance expert at Deakin Business School:

Public pressure to develop large-scale, high-cost, renewable energy infrastructure is huge. Australia has a bold plan to transform its energy market. Prime Minister Anthony Albanese plans to legislate ambitious carbon reduction targets, including net-zero by 2050, and the need to strengthen energy generation capabilities has only been exacerbated by the current gas crisis.

But the costs of developing renewable energy infrastructure on a national level can be prohibitive. Which is why Azad points to the as yet untapped potential of additional international funding sources to help Australia go green.

ASX 200 energy shares missing out on ‘massive untapped demand’

According to Azad, sharia-compliant Islamic bonds would likely see strong demand to support green energy projects in Australia, like large-scale battery grid storage.

The bonds, called sukuk, don’t pay interest to their holders. Instead, they’re classified as securities, backed by tangible assets which enable investors to garner a share of the profits (or losses) when the assets are sold or traded.

Azad says that selling sukuk on the ASX could offer investment certainty for the energy transition.

Sukuk can only be used on ethical investments, “a natural fit for funding green energy projects”.

“Sukuk has already been introduced in many international markets and Australia must be quick to take advantage of the opportunities,” he said.

And the opportunity appears vast, with Deakin estimating Islamic finance is almost a $3 trillion global industry.

Which could open the door to some hefty funding for ASX 200 energy shares’ green projects.

“We simply don’t have the public or private funds in Australia to deliver some of these ambitious projects,” Azad said. “By selling sukuk on the ASX, and cross listing in other exchanges overseas, the government and corporates can attract more foreign investment in renewable energy projects.”

Azad added:

There is a massive untapped demand from Islamic investors for sustainable investment opportunities like this that are sharia compliant, and Islamic finance firms are particularly interested in investing in projects that address the United Nation’s Sustainable Development Goals.

The post ‘Massive untapped demand’: The $3 trillion opportunity ASX 200 energy shares could be missing appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of July 7 2022

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);

More reading

Motley Fool contributor Bernd Struben has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/o8Q1ZPS

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s