Sarah Baldys
Senior Vice President, FINPRO Power & Renewables Leader
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United States
Global investment in the energy transition exceeded $2 trillion for the first time in 2024. In the US alone, $272 billion was invested in the manufacture and deployment of clean energy, electric vehicles, building electrification, and carbon management technology, up 16% from the previous year.
This dynamic growth was fueled by robust legislative support, technological advancements, and a rise in demand for renewable energy sources. The sector has also seen a resurgence in domestic manufacturing, with substantial investments aimed at bolstering US capabilities in clean energy production.
As new companies emerge and existing firms expand, the industry is poised for continued innovation and growth, reflecting a transformative shift towards a more sustainable energy future.
A fast-growing sector faces multiple opportunities, and risks
To succeed in this dynamic environment, these clean energy companies must attract top talent, raise capital, secure contracts, and manage regulatory compliance. While essential, these actions can pose significant risks for their directors, officers, and the company, including:
- Shareholder lawsuits. Projects often rely on future revenue projections to raise capital, attract shareholders, and secure bank loans, stakeholders, and customers. But if these projections fail, or if financial statements are inaccurate, companies may face shareholder lawsuits. Allegations of inaccurate projections may also arise in mergers and acquisitions.
- New technology challenges. The introduction of new technologies carries risks, including performance issues, regulatory approvals, and potential intellectual property claims.
- Delays. Construction delays or supply chain disruptions that lead to longer lead times for critical supplies can throw a project off its timeline. And if the company’s leaders do not effectively communicate the potential impact to stakeholders, they may face claims.
- Public scrutiny. Political collaborations or community opposition can lead to litigation over perceived misleading statements.
- Regulatory compliance: Companies must manage a complex and evolving regulatory landscape that can include federal and individual state regulations.
Clean energy D&O litigation trends
Allegations against clean energy companies typically include misstatements of financials, failure to disclose material facts regarding regulatory approvals, and overly optimistic timelines. Recent litigation trends include:
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- Allegations of misleading statements
- Impact of project delays
- Focus on financial projections
- IPO risks
Allegations of misleading statements related to regulatory approvals, operational performance, and project timelines are the most prevalent in the clean energy sector. As renewable energy companies seek to attract investment, they may face legal challenges if they do not provide transparent and accurate information about their projects and business operations.
Clean energy startup to IPO trajectory
While these risks and trends affect the broader clean energy sector, exposure varies significantly between companies and depending on their stage of maturity. Startups, for example, typically face different challenges than those preparing for an initial public offering (IPO). As companies grow, their directors and officers liability (D&O) insurance programs must also evolve to effectively manage the company’s changing executive liability.
Evolving risks require robust safeguards
The clean energy sector's rapid growth presents unique challenges. Complex regulations, supply chain disruptions, and reliance on new technologies, among others, can lead to costly and potentially disruptive claims. To navigate these challenges and ensure success, clean energy companies must align their D&O programs with current exposures and future growth expectations.
For personalized guidance on the most effective D&O program for your specific circumstances, consult the Marsh FINPRO Power and Renewables team or your FINPRO advisor.
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Olivia Beatty
Vice President - FINPRO Placement
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United States
