Post a novel pandemic, how to identify good investment options
December 21, 2020 • DE Energy
By Shivani Kalbande, Junior Analyst, Distributed Energy
In the recent and ongoing Covid-19 pandemic condition, the world is making every possible effort to get back on track. Investors are trying to change and adapt their approach towards investments with a revised set of parameters as the traditional investment avenues are sensitive towards market fluctuations and render themselves unpredictable. In the current scenario, investors are not just gauging good investment options based on risk-return profile, but also on sustainability and ethical factors.
In their attempt to explore sustainable and ethical investments, investors are majorly focusing on investing in the green and renewable sector. Nowadays, businesses are shifting towards renewable energy consumption to reduce their carbon footprint and capitalize on various incentives provided by the government. Particularly, solar power is becoming widely popular among all classes – from residential to industrial to the commercial sector. This increasing interest is largely driven by emissions-free power, technological innovations, and flexibility of installation on roof, land, water, etc. This steady but significant growth of the global solar industry in the recent past has created the immense potential for stable and low-risk investment.
Outlined below are some of the benefits of solar investments:
- Solar has a rapidly growing global potential – this trend continues to increase year on year as solar deployment costs continue to decline.
- It is a long-term stable investment option with low risk. This is mainly because of the rapid technological evolution and long life cycle of solar plants.
- Investors get to spread their risk by diversifying their portfolio.
- It is socially responsible investment. Compared to fossil fuels, solar energy plants have low carbon emissions, less water usage, less noise, and waste, and have a lesser impact on air quality and the land.
- The government is offering various incentives to both energy users and investors to promote investments in solar. Customers get subsidies on their capital and investors to get tax benefits on their investment.
- One can contribute to reducing global carbon footprints. A typical residential solar PV system can reduce 3-4 tons of carbon emissions each year which is equivalent to planting over 100 trees annually.
According to Renewable Energy Roadmap’s (Remap) scenario 2018 by IRENA, the global solar PV installed capacity in 2030 will be almost 6 times the installed capacity in 2018.
Promising investment options available in the solar space in the upcoming future
Green bond- Bond whose proceeds are used to fund environmental friendly projects. Green bonds allow investors to earn tax-exempt income with the benefit of knowing that the proceeds of their investment are being used in a responsible, green manner.
Solar company stocks- One of the common options for investing in solar is buying stocks of solar companies. Globally, energy customers are looking to shift their energy consumption to solar, facilitating the advent of new solar companies.
Solar income funds- Solar income funds mean investing in government solar power schemes. Investors can invest money in government schemes to fund projects that enable the government to meet its energy goals. These investors will get paid for the energy produced by the resulting solar plants.
Buying your own solar plant- Investors can invest directly in private solar projects as a good long term investment option with stable returns. Developers focused on small to medium-sized commercial and industrial customers, such as Distributed Energy, have created an innovative platform that connects investors with various solar projects across developing countries and offer attractive returns in line with industry standards.
Renewable mutual funds- A financial advisor will spread your pooled money across lots of renewable investments. They can draw the best possible returns from solar stocks, green bonds, and government funds.
It can be seen that solar investment has great potential and diversity. Also, continuous technological innovations of solar are reducing the performance risk in the solar output, resulting in better trust among investors. It can help investors navigate through post-pandemic conditions with increasingly stable returns while contributing towards a social cause.