Here’s a research activity for sustainable investors. Google the name of your bank plus the words “renewable energy”. You might find a few articles about the bank’s investments in wind farms. Your bank headquarters might have solar panels on the roof. There might be a corporate sustainability report discussing employee volunteer projects that have nothing to do with renewable energy. Chances are, you’ll be unconvinced that putting more money in your bank will yield more renewable energy. In this post, we will help you start investing in renewable energy solutions.
Why Is Renewable Energy Interesting to you?
Before you start to dip your toe in renewable energy investments, I recommend having a values-based conversation with yourself. Why are you doing this? What are your financial and environmental impact goals? How will you know if a financial investment meets your goals?
If you decide to put your money to work funding renewable energy projects, then you’ll want to find an investment vehicle focused explicitly on renewable energy. Your money should have a direct connection to creating a more sustainable future. This article will introduce you to a few of these options. We will rank the options from highest to lowest risk.
Riskiest: direct ownership of publicly traded renewable energy companies
You don’t need me to tell you about the financial risk associated with owning shares of Vestas, SunRun, or any other publicly traded company with a dedicated focus on renewable energy. Renewable energy may feel like an inevitable part of our sustainable future. However, the success of any particular company is not guaranteed.
When you buy direct shares of a renewable energy company, your investment is directly connected to that company’s success. Success may be hindered by unfocused corporate strategies, overly aggressive expansion plans, or a reliance on an unproven technology. Proceed with caution.
Less risky: diversified ownership through renewable energy mutual funds
These types of funds are fairly easy to access, but the quality of renewable energy projects ranges widely. You will therefore want to vet each fund and determine if its holdings are compelling enough to deserve your money.
Brookfield Renewable Partners is publicly listed on the New York Stock Exchange as BEP. BEP directly owns $48 billion of renewable energy projects around the world. But 74% of its portfolio is hydroelectric power, which may or may not satisfy your renewable energy dreams.
On the other hand, Fidelity’s “Select Environmental and Alternative Energy Portfolio” operates as a fairly traditional index fund. It differs because it has a higher portion of shares from companies like Microsoft and Google. These two tech companies have some of the most advanced renewable energy targets of any company. This is therefore why they are in this Fidelity fund. Bear in mind that the money you make from this mutual fund has more to do with software than with solar. Renewable energy is the dessert or appetizer, not the main dish.
Least risky: insured investments via banks and credit unions
While not always considered the sexiest of renewable energy investments, a sustainably-focused bank is the easiest and safest way for most investors to advance renewable energy. This may be a good place to start investing in renewable energy solutions.
For example, the Clean Energy Credit Union started taking deposits in 2018. It is already off to a great start with nearly 2,000 members as of May 2020. Like any established bank, it’s federally insured. Anyone can join to start a savings account. Additionally, anyone can apply for a loan to install solar or purchase an electric vehicle.
Local to my hometown of Seattle is Puget Sound Cooperative Credit Union (PSCCU). PSCCU is a full-service credit union founded in 1934. PSCCU provides loans for all sorts of local clean energy projects, including loans to put solar on your home. Search for a credit union in your community. If the credit union provides loans for solar installations, your deposits will directly help to enable solar projects.
adding social criteria to your investment guidelines
Environmental impact and risk profile are two of the many factors to assess when selecting investments. An additional factor that you may want to consider is the social metrics of the investment.
Does the company’s sustainability report list social metrics about living wages, diverse recruitment efforts, or apprenticeship programs? How diverse is the board of the directors? Studies have demonstrated that the renewable energy industry must work harder to cultivate a diverse workforce. If you don’t see social metrics being addressed, it is not necessarily a reason to avoid the investment opportunity. However, it is a great opportunity to contact the company. Request more action on their part to address social metrics in addition to their environmental goals.