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Impact Investment: A growing green energy equation

January 5, 2021 • DE Energy

Green energy, impact investing, value investing

By Shivani Kalbande, Junior Analyst, Distributed Energy

Impact Investment trends are gaining momentum in the investment markets worldwide. Investors from all demographic groups are focusing on investments with positive, measurable, social, and environmental impact alongside a high ROI. 

One of the most widely discussed forms of impact investment is renewable energy investing. Global energy consumption is increasing exponentially due to rapid industrialization and population growth. This is increasing the demand for energy production, especially for popular conventional resources like coal, oil, gas, etc. Over the years, we have seen how the consumption of these fossil fuel-based energy sources has negatively impacted our environment; becoming one of the major causes of climate change. Renewable energy derived from natural sources like the sun and wind can be replenished at a faster rate than they are consumed and therefore offer a viable solution to the world’s energy challenges.

Social & environmental impacts of investing in renewable energy –

  • Absence of greenhouse gas emissions- The most important benefit of renewable energy is that there is no greenhouse or other pollution-creating gas emission. Conventional power plants create around 2.2 pounds of CO2 for every kilowatt-hour of electricity and solar panels and wind turbines create none at all.
  • Clean air- Health hazards arising from air pollution have become a critically important issue in many developing countries, where up to 2.9 billion people still rely on wood, coal, and charcoal for cooking and heating homes. Solar and biomass technologies can be opted as cleaner alternatives and alleviate health implications.
  • Use of locally available energy sources- The majority of the population living in rural areas or remote places face the issue of lack of reliable power sources. Stand-alone and mini-grid renewable electricity solutions can facilitate uninterrupted power supply in remote areas for their consumption.
  • Creates employment- The renewable energy sector is providing a significant and growing number of jobs in manufacturing, installation, and other areas of operation. According to IRENA’s estimates, the sector has employed a record 10.3 million people worldwide in 2017, driven by rising investments. 

Impact investments offer a balance between the positive and negative impacts of economic activities. The renewable energy field is a great example of this balance. Over the last decade, clean energy investments have caught the attention of investors, especially as a reliable long-term asset class.

Though the world has chosen renewable energy as one of the paths towards its sustainable goals, it is still in the early stages. In order to keep global temperatures from increasing over 1.5° Celsius from current levels, the United Nations estimates that the world would need to shift between $3 trillion to $3.5 trillion a year for the next 30 years from the dominant fossil fuel reliance to 100% alternative, clean energy sources. By 2025, investments in clean energy will need to be greater than in fossil fuels, otherwise, climate implications may be irreversible. By 2030, investments in coal must cease unless we can innovate carbon capture and storage technology. Investments in solar technology need to increase exponentially by $250 billion a year. These targets can only be achieved by aligning the efforts of investors and businesses towards the common goal. Many companies are already making the transition to clean energy. Developers like Distributed Energy are helping investors choose renewable energy investing as an asset class in their investment mix, which will provide attractive and reliable returns. 

Distributed Energy