Renewable energy might have once been politically divisive, but this year seems to have marked a watershed moment – a shift in the mainstream acceptability of the clean stuff among even the stuffiest of investors as an asset class to be reckoned with.
The latest figures from Bloomberg New Energy Finance point to a global renewables energy takeover:
“Renewable energy sources are set to represent almost three quarters of the $10.2 trillion the world will invest in new power generating technology until 2040, thanks to rapidly falling costs for solar and wind power, and a growing role for batteries, including electric vehicle batteries, in balancing supply and demand,” its New Energy Outlook report said.
The report added that 72 per cent of the $10.2 trillion spent on new power generation worldwide to 2040 will be invested in new wind and solar PV plants.
Investors are becoming more aware of the growing opportunities in the renewables sector.
In this country, the Government may yet choose to tinker further with policy, altering incentives and therefore returns for those who choose to put their money into wind, solar, hydro, biogas and even (coming soon) tidal.
However compared with savings rates, the returns look attractive, at roughly 5 to 7 per cent, give or take a few per cent depending on the type of project.
Renewable energy assets also behave differently to traditional equity investments – they generate an income from the electricity price they attract, but mostly the subsidy they receive. The electricity price can go up and down but the subsidy is fixed for the long term, giving more certainty of returns than you might get from equities.
The certainty of the subsidies means that on loans to renewable energy projects, the repayments to lenders acts as a kind of dividend. This is why institutional investors such as pension funds find renewables particularly attractive – they are compelling alternative to traditional dividend-paying stocks (which incidentally, tend to be multinational oil companies – the very antithesis of renewables).
New research from Renewable Energy Waste Solutions (REWS), a new renewable energy company, reveals 71 per cent of institutional investors and IFAs expect the amount invested in renewables to increase over the next three years.
Over the longer term, exposure to renewables from investors will be even stronger. Between now and 2022, 75 per cent of investors expect the amount invested to increase, with 23 per cent anticipating a dramatic rise.
William McClintock, Chairman REWS said: “Investors are becoming more aware of the growing opportunities in the renewables sector. As the industry builds on its already impressive track record for providing steady and strong returns to investors, its attractiveness as an asset class will only increase. Furthermore, asset owners are becoming increasingly sophisticated and looking for ways to diversify their portfolios and renewables offers them this.”
Of course – we are biased – this site is about profit with principles, and there is arguably no better place for the two to come together than lean and green energy. But it is a fundamentally interesting, worthy and potentially lucrative place to park your cash, even for the non-eco investor.
Here are some picks if you want your money to be green-powered (remember you can only invest your Innovative Finance ISA – IFISA – with one platform)
Thrive Renewables, formerly Triodos Renewables, was established more than 20 years ago and now has more than 6,300 investors and more than 90MW of renewable generation capacity under management.
Thrive Renewables provides an opportunity to invest directly in a portfolio of renewable energy projects, delivering financial returns and contributing to tangible greenhouse gas emission reductions.
It runs monthly auctions, in which you can buy or sell shares. It also issues new share raises from time to time.
Abundance was one of the first recipients of our Good Egg kitemark, which launched last month. It is a peer-to-peer lending platform for renewable energy-related projects and businesses, allowing investors (lenders) to put as little as £5 – the lowest amount you can invest on any investment platform in the UK. This enables people who don’t want to put too much capital at risk to give it a go and build up confidence.
Investments on Abundance can be held in an Innovative Finance ISA tax-free.
Watch Abundance talk to Good With Money here about investing in renewables after Brexit.
Downing Crowd is not exclusively a renewable energy investment platform – it offers loans to a number of different types of businesses, including care homes and pubs. However, its parent company, Downing LLP, owns a substantial number of renewable energy projects which occasionally need to be refinanced. These can often be found on the Downing Crowd platform. For example, the Bagnall Renewables Rolling Bond, which will appear soon on the site, will pay 3.25 per cent to investors and can be held in an IFISA.
A newly launched crowdfunding platform that allows people to invest in community energy projects tax-free through the IFISA. The site has two projects listed as “coming soon”: Bristol Community Energy – a 4.5 per cent, 3-year bond, and Bath & West Community Energy – a 5 per cent, 5-year bond.
Assetz Capital started out as a buy to let investment platform, but moved into peer-to-peer lending when it was just getting going and is now well established. It offers a range of peer-to-peer loans which can go in an Assetz IFISA and it does have the odd “green” one, secured against wind turbines or solar farms. Its Green Energy Income Account* pays 7 per cent a year.
Other crowdfunding platforms worth a look….
Occasionally, crowdfunding platforms such as Seedrs, SyndicateRoom, Crowdcube and Crowd2fund* offer renewable energy projects or other low-carbon businesses. It is worth signing up to a few to receive the email alerts – that way you won’t miss any interesting eco businesses looking for investment (Warning: crowdfunding can get quite addictive, but it isn’t for you if you can’t afford to lose your capital).
Sustainability funds that invest in renewable energy….
There are a number of more traditional funds that are geared towards clean energy, such as WHEB Sustainability and Assura. Details of these and lots more can be found in our just published Good Investment Review.
Triodos Sustainable Pioneer Fund ISA
The fund invests in over 40 different companies in the fields of: sustainable energy (climate protection), environmental technology (clean earth), medical technology (healthy people), as well as companies that are pioneers in Corporate Social Responsibility (CSR). One of these is the ultra-cool Tesla – which promises to bring high performance electric vehicles and solar power battery storage to the masses. You need at least £1,000 to open one.
*Where you see a *, it means Good With Money gets paid a small referral fee if you sign up to this deal.