With the current developments in the energy market, sustainable investment in wind and solar energy does not seem like a bad idea. But there is a lot of choice and this can be opaque, especially for novice investors. ‘Sustainable investing takes time, so you’ll have to do your homework.’
With the Paris Climate Agreement (2015) in mind and the desire to reduce the use of fossil fuels and our CO2 emissions, it is not surprising that wind and solar energy are the fastest-growing energy sources in the world. After all, CO2 emissions are zero, and wind and sun will never run out. More and more pension funds, insurers, and private investors are therefore discovering the possibilities of investing in wind turbines and solar parks.
Investing in sustainable energy is an example of sustainable investing, a market that can be foggy, especially for novice investors. After all, what is sustainable investing, and what fits best? A party that keeps a close eye on this market is VBDO, the Association of Investors for Sustainable Development.
‘We have been working on this theme for 27 years,’ says Mart van Kuijk, project manager at VBDO. ‘We see that sustainable investing has undergone a strong development in recent years. Our research last year shows that 38 percent of the privately invested capital now concerns sustainable investments. A doubling compared to the previous year. A huge shift has therefore taken place: sustainable investing has become the norm.’
This is a positive development in itself, but according to Van Kuijk, the commercialization of sustainability is imminent. ‘Sometimes investments are presented as more sustainable than they actually are. It is important to thoroughly immerse yourself in the various products. Fortunately, more and more European legislation and regulations regarding sustainable investing are emerging. We are following this closely. But investments in wind and solar energy are almost always sustainable.’
Windmills and solar parks
The market for sustainable investments has therefore grown enormously. Where to start? Van Kuijk advises investors to first go through a number of steps. ‘Formulate what sustainability means to you and draw up an investment plan. It provides guidance in times of heavy weather and prevents you from going along with the emotion of the market. Only invest with money that you can really afford to lose and look carefully at the conditions: what is the term, is it possible to sell in the meantime, what is the intended return, what are the costs, is it subject to supervision by the AFM? A rule of thumb is: the higher the return, the higher the risk.’
With a well-thought-out plan in your pocket – in which risk spreading is indispensable – it is then easier to determine where to invest. Think of stocks, bonds, and alternative investments.
1. Banks and asset managers
Through banks, you can easily get into sustainable funds. You determine your investment and how much risk you want to run (offensive, neutral, defensive). If you prefer a fund that is specifically aimed at the energy transition, you can opt for theme investments. A fund is set up around a specific sustainability theme, such as renewable energy or biodiversity. Companies are then selected for these types of funds that perform well on this theme. For example, ASN Bank’s biodiversity fund or the MSCI Climate Paris Aligned Index.
2. Green funds
A separate category are green funds. In this case, investment funds lend money to companies that operate green in a manner that is described in Dutch law. The returns on these green investments are usually not high, people often find them interesting mainly because of the tax benefit. Because demand is higher than supply, it is not always possible to invest in these funds. The report ‘How do you make sustainable choices’ by VBDO contains examples such as the ASN Groenprojectenfonds, the Triodos Groenfonds, and Groenfonds Regional Duurzaam (“Meewind”).
3. Cooperatives and local initiatives
You can directly invest in wind and solar energy in sustainable projects of local energy cooperatives. It obviously produces a return, but for many people, this way of investing is interesting because they actively help to make their own environment more sustainable. At EnergieSamen.nu or HierOpgewekt.nl you can look at projects in your area. Peter and Miriam de Regt have also joined such a local project. In 2012 no permit had yet been issued, now 37 of the 47 wind turbines are running. ‘With a lead time of at least ten years, you have to be sure before you start that you can miss the money for a long time,’ says Peter de Regt.
4. Investing in projects
There are also projects specifically aimed at solar and wind energy. Think of investment funds and crowdfunding platforms. An example is Meewind. This fund offers everyone the opportunity to invest in sustainable and profitable energy projects (input from 250 euros). These funds provide the finance for these projects and (where necessary) play a role in the development, construction and operation. Crowdfunding platforms such as Oneplanetcrowd.nl and Duurzaaminvesteren.nl are also a possibility. They are platforms that bring companies and private investors together. As a private investor, you decide which offers you invest in and for what amount. For example in solar parks.
5. Investing in companies
Investing directly in companies is an interesting choice if you share a company’s vision and have confidence in the product. For example, the company Fastned – of the charging stations for electric cars – issued bonds in the past to raise capital. Although these types of bonds often show good returns, repayments are ultimately dependent on the financial health of a company.
Van Kuijk recognizes the developments of the aforementioned investments, projects, and energy cooperatives. Many investors want to be actively involved. Small-scale projects in particular meet this need, but larger wind farms also recognize the importance of this involvement. You see, for example, 70 percent is financed by large companies and institutional investors, and 30 percent is contributed by private investors. It creates support.’ At the same time, Van Kuijk has a comment. ‘You invest in one project. To spread your risk, it is better not to bet on one horse.’
The energy transition naturally offers more opportunities than investing in energy generation from wind and sun. Because the developments in the field of green hydrogen and generating energy from geothermal energy are not standing still either. And what about storing energy in batteries? However, these developments require major investments. On the one hand, this offers attractive returns, but at the same time the risk should not be underestimated: developments are moving fast and technologies follow each other in rapid succession. Not every investment made will give positive returns. Van Kuijk confirms this and again emphasizes the importance of drawing up a plan and spreading risks. ‘For those who want to decide for themselves in which sustainable investments they will invest – and therefore do not opt for a sustainable asset manager – will have to make many personal considerations. You have to do your homework. Indeed, investing sustainably yourself takes time.”
Source: This article was previously published in Dutch in Het Nederlands Dagblad.