Over the last few years, investors and financial markets have become more focused on environmental, social, and governance (ESG) considerations in making investment decisions. ESG considers how investments impact the environment, social factors, and governance issues. Investors are increasingly applying these nonfinancial factors in making investment decisions.
A recent report from the Center for ESG and Sustainability (CESGS) provides a new analysis suggesting that nuclear power does a remarkable job when measured by ESG standards and deserves increased support from the financial community.
The report, Solving the Energy Trilemma: The Case of Nuclear as a Sustainable Investment, highlights what it calls the “energy trilemma”: how to meet goals of reliability, affordability, and sustainability in power generation. CESGS says the nuclear industry has an important role in solving this trilemma and is already well equipped to do so.
CESGS reaches this conclusion by first recognizing nuclear power’s remarkable efficiency and reliability, including its energy density, ability to deliver consistent baseload power, and relatively stable pricing due to long-term fuel supply contracts, noting: “Even absent ESG considerations, as historical returns have underscored, nuclear is an investible asset.”
The report emphasizes that the nuclear industry performs very strongly on the sustainability portion of the trilemma, particularly when measured against ESG standards. CESGS urges the community, including ESG rating agencies, to understand that achieving climate and economic goals “will not be possible without nuclear [power]” and to recognize “the strong ESG performance” of the nuclear industry, which will lead to increased investment in the sector.
The CESGS report provides an in-depth review of each category of ESG performance standards. On the environmental performance front, nuclear power’s energy density and “best-in-class” performance with respect to lifecycle land use area are already well known. Nuclear power has essentially no carbon emissions at the point of generation, low water consumption, and a proven ability to safely store waste. CESGS also highlights advances in technology and policy changes that are likely to reduce nuclear waste streams.
Regarding the social performance standards, nuclear’s resiliency during natural disasters and reliability performance make it a “critical backbone of the nation’s baseload electricity supply,” which provides affordable energy at a consistent, affordable price. Nuclear’s safety record is also unparalleled in the energy industry.
Last, regarding governance standards, the nuclear industry provides some of the highest-paid wage earners across the energy industry. The industry also is “a top performer for gender, race, and age diversity as compared to other electricity and fuel technologies.” These factors may contribute to the “highly positive” attitudes toward nuclear power from those who live closest to nuclear power generation facilities.
Morgan Lewis is actively monitoring ESG trends in nuclear power generation, and more broadly, with our ESG and sustainability practice. We will continue to provide updates on how ESG standards evaluate and recognize the nuclear industry.