The head of one of Canada’s leading energy investment firms isn’t so sure whether a “recent euphoria” surrounding renewable energy is genuinely overtaking the traditional hold of fossil fuels.
Brian Boulanger, chief executive officer of ARC Financial Corp., believes a meaningful transition into more sustainable and climate-friendly energy sources is indeed happening. But investors aren’t ditching fossil fuels altogether, he said.
“I tend to call it an energy diversification rather than an energy transition, because I do think there is a sense in certain segments of the market that the transition feels like it will happen more quickly rather than it actually will,” Boulanger said in an interview Wednesday.
“People that want to invest in energy over the next 10 to 20 years, as we undertake this transition, need to be aware that there will be moments of euphoria where it feels like it’s happening quickly and then reality will set back in.”
That’s why many insiders are now being increasingly cautious around valuations for companies — renewable-oriented or not — in the energy sector, Boulanger said.
To that end, ARC Financial Corp. continues to support fossil-fuel businesses, while also expanding its energy portfolio by investing close to $100 million into greener sources like solar power.
“I’ve been in this space for over two decades and I can tell you volatility hasn’t ever been this pronounced like the last two years,” Boulanger said.
“There’s lots happening and there’s lots of policy also affecting those valuations, which can change relatively quickly. So, best to be disciplined if you want to play here.”
Potential investors should start out by looking at the management of any given company, according to Boulanger, with tangible and commercial innovation also being a top priority.
“We’re not looking to back early-stage technology. We’re not looking to land somebody on the moon,” he said. “We’re looking to play in a way that truly sees the energy transition through.”
Asked whether surging commodities are having an impact on investment, Boulanger said the climbing prices “are actually an attractive point, because companies are doing much better now to cut down the costs of operation.”
“When it comes to a timeframe for the sustainable transition, I know that it’s still uncertain,” he said. “But I also know there is a real intent both in Calgary and the overall energy space that this happens in the right way. So, we’re placing our bets on that.”