A Beginner’s Guide to Green Energy Investing

Green Energy Investing

Global warming, extreme weather, heatwaves, wildfires, droughts, melting polar ice, and rising sea levels are the direct consequences of overloading our atmosphere with carbon. 

The prime reason for our increasing carbon footprint is burning fossil fuels to drive cars and generate electricity to run machinery, household gadgets, and industrial infrastructure. It is time we transitioned from conventional energy sources to renewable sources.

Here we share why and how you should invest in green energy.    

What is green energy investing?

As defined by the EPA (Environmental Protection Agency), green energy stands for all energy resources that provide the highest environmental gains. It includes solar, wind, geothermal, and biogas energy and the electricity generated through low-impact hydroelectric projects such as run-of-the-river hydroelectricity. 

Green energy is vital for reducing CO2 emissions and tackling climate change. Investing in projects that support the generation and supply of green energy is known as green energy investing.

Why should you invest in green energy?

  1. Rising market share: Green energy is making waves in capital markets across the globe. According to a Bloomberg New Energy Finance report, renewable energy will account for up to 60% of power generation by 2030, and the investment in fossil fuels will fall to 46% from 64% in 2013. Wind and solar energy generation will go up from 3% to 16% by 2030. So, there is a lot of scope for investing in green energy stocks. 
  1. Yields more returns: According to the International Renewable Energy Agency (IRENA), investing in green energy will generate 3 to 8 times higher returns than usual investments. Studies conducted by WRI’s Aqueduct platform show that by 2030, 2.5 million people and $42 billion in the urban property will be affected by coastal flooding caused due to climate change. Investing in green energy can help mitigate climate change.
  1. Generates new jobs: As per IRENA’s Transforming Energy Scenario, the number of jobs in the renewable energy sector will triple by 2050, which means this industry will generate more than 42 million jobs in 2030. Simultaneously, the fossil fuel industry is predicted to lose about 6 million jobs.

How to invest in green energy?

  1. Hydropower: Hydropower generates 7% of the total 17% green energy in the United States. One of the best ways to invest in green energy and reap its rewards in the future is to invest in hydropower. Some major companies in the hydropower sector that you can invest in are Brookfield Renewable Partners (BEP), Innergex Renewable Energy (INGXF), and Hydro One Limited (HRNNF).
  1. Wind power: It is also a good option. You can look for companies that run wind farms or manufacture wind turbines. Some companies that you can invest in are NextEra Energy Partners LP (NEP), Siemens Gamesa (GCTAY), and Vestas Wind Systems (VWDRY).
  1. Solar power: It is another primary source of green energy in the United States. You can promote solar energy generation by investing in companies that install, manufacture, or research the technology and products related to solar energy. Some companies that you can invest in are First Solar (FSLR), JinkoSolar Holding Co. Ltd. (JKS), and Sunpower Corp. (SPWR).
  1. Other methods: If you don’t want to invest in companies directly, you can always consider investing in green energy funds and ETFs. Please make use of our opportunities page to stay current on the latest green energy investment opportunities.

About Impact Capital Partners

If you are looking to earn green returns, Impact Capital Partners should be your one-stop destination. We will help you find impact investments that generate returns and promote the causes you believe in. If you have any queries, fill out our online contact form, and we will get in touch.

Emerging Market Private Debt

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This is a female-founded Fund Manager who seeks to generate competitive financial returns PLUS positive economic, social and/or environmental impact by providing financing to Small and Medium Enterprises (“SMEs”) in very select high-growth developing economies with stable political climates and reliable legal systems.

Why? – The Importance of SMEs

SMEs play a major role in the world economy, particularly in developing economies, where micro-enterprises and small-scale enterprises account for the majority of firms and a large share of employment and, accordingly, are believed  to be the “engines” of job growth.

The Problem – Access to affordable capital

SMEs are at a natural disadvantage to larger firms in accessing debt finance, due to various factors such as: 

  • asymmetric information
  • higher transaction costs
  • under-collateralization
  • limited credit history
  • and/or lack of skills to produce sophisticated financial statements

Additionally, in many developing countries, the global economic and financial crisis in 2007-2008 exacerbated the financial constraints experienced by SMEs.

The Opportunity – A compelling supply-demand mismatch

The Manger believes the underserved nature of such a large segment of the global economy, coupled with a strong demand for capital from the SMEs themselves, has created significant opportunity for investment. Because of the current investing environment, they believe that SMEs can offer attractive investment terms in the form of…

  • current cash yield
  • deferred interest and equity warrants
  • Plus more attractive security features in the form of loan covenants and quality collateral. 
  • Additionally, as compared to larger companies, SMEs often have simpler capital structures and carry less debt, thus aiding the structuring and negotiation process and allowing for greater flexibility in structuring favorable transactions. 

The Approach – Boots-on-the-Ground Investment Partner Model

The Manager’s unique boots-on-the-ground Investment Partner model is the primary differentiator, providing investors with…

  • lower risk access to the private investment opportunities available in developing economies
  • boots-on-the-ground to mitigate idiosyncratic local market risk
  • “double” underwriting to ensure adherence to risk standards and specific client mandates
  • emerging market exposure without the volatility of public markets 
  • comprehensive diversification such that no single macro-economic factor significantly affects the portfolio

The Fund Manger believes the investment opportunity to provide growth-stage financing to SMEs is significant, and with their Investment Partner model, the ability to scale is equally significant. They currently utilize 12 Investment Partners but they have the ability to add partners as opportunities arise in other countries and/or regions. In accordance with a risk management philosophy which emphasizes a comprehensive approach to investing and asset management, Investment Partners’ strategies are tailored to the characteristics of private financing of SMEs in developing economies. This strategy brings the benefits and diversification of a fund-of-funds, but, with greater ongoing oversight, customized investments and without the additional layer of fees.

Impact Performance Goals

100% of their loans and/or invested companies meet top-down Environmental, Social & Governance (ESG) screens and key benchmarks, including…

  • Aligned with the UN’s Sustainable Development Goals
  • Conform to the IFC Exclusion List
  • Meet local and international laws and respective practices
  • In compliance with local environmental, labor, health, safety and business laws
  • Represent in writing their company’s ongoing commitment to ESG practices
    • Environmental practices such as: energy savings, waste reduction and water conservation
    • Social policies for fair hiring, compensation, maternity leave, community service and corporate donations

Plus, 100% of their borrowers commit to identify and track various bottom-up impact metrics, as defined by the GIIN’s Impact Reporting and Investment Standards (IRIS) metrics that all track to at least one of the United Nations Sustainable Development Goals (UN SDGs)

UN Sustainable Development Goals

As of 9/30/20, this manager’s borrower companies have historically mapped to 14 of the 17 SDGs, including:

  • SDG 1: No Poverty
  • SDG 2: Zero Hunger
  • SDG 3: Good Health & Well-Being
  • SDG 4: Quality Education
  • SDG 5: Gender Equality
  • SDG 7: Affordable & Clean Energy
  • SDG 8: Decent Work & Economic Growth
  • SDG 9: Industry, Innovation & Infrastructure
  • SDG 10: Reduced Inequalities
  • SDG 11: Sustainable City & Communities
  • SDG 12: Responsible Consumption & Production
  • SDG 14: Life Below Water
  • SDG 15: Life on Land
  • SDG 17: Partnerships

The Track Record

Since launching their strategy in June 2013, and as of 9/30/20*, they have… 

  • deployed over $1.38B in private debt (including trade finance & term loans)
  • In 4 regions around the globe
  • in 37 developing economies
  • to 96 SMEs 
  • supporting 42,228 permanent jobs 
  • with zero default losses
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Additional Resources

  • Manager Name & Website – Upon Request
  • Pitch Deck – Upon Request
  • Term Sheet – Upon Request
  • Full Access to Data Room – Upon Request
  • 2019 Sustainability & Impact Report – Upon Request
  • Manager’s Network of Boots-On-The-Ground Investment Partners – Upon Request

Emerging Market Trade Finance

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This Fund manager is focused on facilitating trade finance by making short term private loans to private growth stage companies who are committed to responsible, sustainable management of their companies and to creating positive, measurable impact in their communities. The manager’s objectives are to provide current income, capital preservation and modest capital appreciation primarily through providing trade finance facilities to established, growth stage, middle market enterprises through a global network of institutional class investment partners in carefully selected developing economies where access to affordable capital is significantly limited. The shortage of capital helps create meaningful opportunity to generate competitive risk-adjusted returns and positive impact.

Investment Process

The manager employs a disciplined, scalable investment process in its goal to identify appropriate countries, access a robust pipeline of highly selective investment opportunities, and effectively manage risk.  Designed to identify countries with strong growth fundamentals, favorable legal and political frameworks, and unrestricted capital access, target countries are selected through proprietary top-down macroeconomic analysis, augmented with bottom-up expertise from our local market origination partners.  

Origination Partners

Origination partners have been carefully selected based on their demonstrated track records, years of experience in their asset class, independent risk controls and established networks in their specific regions, countries and local markets.  

The Portfolio

The portfolio will consist primarily of directly originated trade finance facilities for established, sustainable private companies in need of growth stage financing, who are also committed to creating positive impact in their communities.

Understanding Trade Finance

“Trade is the lifeblood of the world economy and a key driver of global integration, helping small and medium enterprises (SMEs) to grow and create jobs. Trade finance is the engine of an estimated $16 trillion in annual global commerce and is fundamental to the movement of goods at all stages of the supply chain, especially in emerging markets.”

Manager Overview

  • Track record since June 2013
    • $660 million in Trade Finance transaction (as of 6/30/20)
    • 56 Small & Mid-Sized Businesses supported
    • 22 Developing economies
  • Investment Partner Model
  • Comprehensive Diversification
    • Across Regions
    • Across Countries
    • Across Sectors
    • Across Investment Partners
  • Short Duration
    • Maturities less than 1-year
    • Average Duration ~0.33 years
  • Good Liquidity
    • 1-year Lock & 25% quarterly
    • Self-Liquidating SMA
  • 100% US Dollar Denominated
  • 3rd Party Collateral Managers
  • Insurance on 100% of Trade Finance loans
    • Two most common types of insurance include:
      • Asset Insurance for goods in the warehouse
      • Cost Insurance and Freight (CIF), which is basically transport insurance, in the event anything happens during transit.
    • Both types of insurance are relatively low cost and are based on the type of goods
    • Sovereign Risk Insurance
      • A bit more expensive, but still not that high since the approved countries have relatively low sovereign risk
    • Credit Insurance Risk
      • Rarely needed because Manager is generally in the lowest risk type of Trade Finance

U.N. Sustainable Development Goals

  • SDG 1: No Poverty
  • SDG 2: Zero Hunger
  • SDG 5: Gender Equality
  • SDG 8: Decent Work & Economic Growth
  • SDG 9: Industry, Innovation & Infrastructure
  • SDG 12: Responsible Consumption & Production
  • SDG 17: Partnerships

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German Sustainable Infrastructure

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This German fund manager’s focus is on sustainable infrastructure in the renewable energy sector, wind and solar power as well as grids and storage technology. Their target portfolio combines existing operational assets and development assets in one vehicle to provide a blended risk and return to investors.

The Joint Phase Portfolio (JPP)*

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Operational Allocation*

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Development Allocation*

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Additional Resources

  • Manager’s Name & Website – Upon Request
  • Pitch Deck – Upon Request

India Renewable Private Equity Fund

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This manager, a JV between one of India’s largest Private Equity funds, and a global leader in renewable energy, is currently raising commitments for their India-focused green infrastructure strategy (the “Fund”). Whilst it’s a single-country EM play, the Fund will offer significant downside protection through a unique concessional structure outlined below. 

The sector focus of the Fund is on broad themes of decarbonization of energy and its uses, spanning renewable energy, energy efficiency, energy storage, e-mobility, resource conservation and associated value chains. Whilst emphasizing the long-term contracted cash flows investors expect from infrastructure projects, the Fund will also provide additional upside through a private equity approach.

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Strategy*

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Target Sectors

  • 30% Renewable Energy (RE) Generation – Utility Scale RE, C&I Distributed Generation, Hybrid
  • 30% Energy Services – Energy Efficiency, storage, O&M, Asset Management, Smart Grid Enablers
  • 20% e-Mobility – Mobility as a Service, Battery as a Service, Clean Transportation, Shared Mobility, Charging Infrastructure
  • 20% Resource Efficiency – Waste Management, Recycling, Waste to Energy, Emission Control, Water Management, Others

U.N. Sustainable Development Goals

  • Renewable Energy Generation
    • SDG 13: Climate Action
    • SDG 7: Affordable & Clean Energy
    • SDG 12: Responsible Consumption & Production
    • SDG 8: Decent Work & Economic Growth
    • SDG 3: Good Health & Well-Being
  • Energy Services & e-Mobility
    • SDG 11: Sustainable City & Communities
    • SDG 13: Climate Action
    • SDG 7: Affordable & Clean Energy
    • SDG 9: Industry, Innovation & Infrastructure
    • SDG 8: Decent Work & Economic Growth
    • SDG 3: Good Health & Well-Being
  • Resource Efficiency
    • SDG 6: Clean Water & Sanitation
    • SDG 12: Responsible Consumption & Production
    • SDG 11: Sustainable City & Communities
    • SDG 8: Decent Work & Economic Growth
    • SDG 3: Good Health & Well-Being

Transaction Details*

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Co-Investment Opportunities*

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Additional Resources

  • Name & Website of JV – Upon Request
  • Name & Website of leading PE Firm in India – Upon Request
  • Name of Global Leader in Renewable Energy – Upon Request
  • Name & Website of Development Finance Institution providing support – Upon Request
  • Pitch Deck – Upon Request
  • Access to Data Room – Upon Request

Emerging Europe Growth Equity Fund

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This Fund manager has been investing in private equity and private credit in Emerging Europe, Central Asia and Turkey since 2005.  Their investment focus is on Small and Medium Enterprises (SMEs) with an emphasis on developmental impact as a consequence of their investments.  Their 25-person team operates out of five offices in London, Luxembourg, Bucharest, Istanbul and Almaty.

Fund Overview

  • Strategic focus on the rapidly expanding SME segment in Emerging Europe – benefitting from the evolving global and regional trends
  • No other private market offers the growth of an emerging market and the structure & stability of the European Union 

Why Invest in Emerging Europe?

  • Borderless access to the world’s second largest market
  • Solid legal & regulatory framework built on EU standards
  • Abundance of SMEs with high growth potential but poor access to funding 
  • A large, low-cost and highly skilled labour force
  • Stable currency outlook
  • Comparatively low household and government indebtedness
  • Low corporate tax rates

Emerging Europe is One of the Fastest Growing Economies in the the World

  • Emerging Europe has developed into a key trading partner and manufacturing base within the European Union. This has catalyzed the growth in the region.

Key Growth Themes

  • ECONOMIC CONVERGENCE – Increasing disposable income causing an evolution in consumption patterns
  • REGIONAL CONSOLIDATION – Increasing integration & competitiveness of the region within the EU + Increased demand to reduce dependency on external supply chains

Port-COVID Roadmap – Key Themes

  • The world economy is retreating from globalization and seeking increased self- sufficiency at country and regional levels
  • Increase in the importance of regional supply chains within the EU. Regional consolidation will result in higher demand for products manufactured in Emerging Europe
  • Misplaced perception of risk has lowered price expectations of private companies

An Under-Penetrated Private Equity Market

  • One of the most overlooked regions for private equity globally
  • Shortage of growth capital for businesses in the region
  • 90% of the economy are SMEs and in need of financing for further growth 
  • Poor access to funding provides considerable opportunity to generate above average returns

Fund Details*

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Additional Resources

  • Manager’s Name & Website – Upon Request
  • Pitch Deck – Upon Request

Africa Sustainable Independent Power Producer

Power Africa

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – This Independent Power Producer (IPP), is an energy solutions provider based in the USA with operations in West Africa. They have transitioned from heavy oil and diesel to Liquid Natural Gas (LNG) + their long-term ambition is to deliver energy solutions exclusively from low carbon resources. Their operations reflect their firm commitment to increasing access to reliable, sustainable and cost-effective electricity and natural gas in Africa + they are actively seeking to expand their operations across the African continent with a vision to be the leading sustainable energy solution provider in Africa.

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Established IPP with Successful Operating History*

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Mission

  • Develop sustainable energy solutions in Africa
  • Emphasize the training and development of local expertise
  • Utilize appropriate technologies in a safe, efficient and reliable manner

Vision

  • To be the leading sustainable energy solution provider in Africa

Existing Power Plants*

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Sustainability

Basing their operations on transition technologies and fuels, as an interim step towards their long term objectives, allows this IPP to develop the basic energy infrastructure required to provide clients access to reliable, sustainable and cost-effective energy. Over the next decade, they plan to convert their assets from transition solutions to low carbon energy solutions.

  • Transition Phase
    • Expansion – Building and operating the basic energy infrastructure (natural-gas-fired power generation, natural gas midstream solutions and electricity transmission solutions) to deliver reliable, sustainable and affordable electricity and natural gas to their clients.
    • Conversion – Facilitating the conversion of clients’ equipment (stationary and mobile) from heavy hydrocarbons to natural gas fuels as a transition to hydrogen fuels.
    • Development – Developing wind and hydro-electric energy solutions to be built and operated during the Low Carbon Phase.
  • Low Carbon Phase
    • Renewables – Switching a majority (>85%) of their electricity solutions to PV solar, wind and hydro-electric solutions.
    • Hydrogen – Switching client equipment (stationary and mobile) to hydrogen fuels.
    • Batteries – Deploying alternative batteries such as cryogenic storage and pumped hydro.

Additional Sustainability & Impact Highlights

  • Over the past 13 years of operation, this IPP has transitioned from heavy oil and diesel to Liquid Natural gas (LNG). LNG is considered a cleaner option to other fossil fuel resources, as it releases up to 50% less CO2 than coal and 20-30% less than oil. Additionally, compared to other types of fuel, there are negligible sulfur dioxide (SO2), Nitrogen Oxide (NOx), mercury (Hg), and particulate emissions.-
  • This IPP has significantly reduced the stress to the National power grid, and is now a net contributor to the grid.
  • Community – By developing natural gas infrastructure they seek to improve the livelihoods of stakeholders in their communities through provision of reliable, affordable and sustainable energy.
  • Community Engagement – Their numerous community engagement activities enables them to develop strong relations with members and representatives of these municipalities, including:
    • Training of locals to work in our operation areas
    • Developing alternative livelihood programs for project affected persons
    • Donating to local community projects and organizations
    • Holding frequent youth career and empowerment workshops
    • As an expression of the firm’s commitment to the environment, they have planted over 150,000 teak stumps along their natural gas pipeline as of July 2020, in order to reclaim the land. The exercise engages the surrounding communities by recruiting and employing locals for the planting of the teak, showing the firm’s commitment to serving and positively impacting the communities in which it operates.
  • Employment – They are committed to supporting employment in their local communities and fostering a culture of accountability and transparency, which strengthen the organization and increases productivity.

Socio-Economic Influence

  • The pipeline project will greatly impact on the socio-economic status of the local communities, the municipal/district and the Western Region as a whole. The Western Region is one of the deprived regions of the country with low coverage of social amenities as well as a low standard of living. It is anticipated that social structures, income levels and economic wellbeing, infrastructure (roads, education, and health) will be significantly improved in the project areas.
  • As is common with the advent of any project, it is expected that the gas pipeline project will create employment opportunities directly and indirectly by stimulating the local economy. The hospitality industry, light industry, trading and banking are all likely to thrive during the implementation of the gas pipeline project. The catchment area competencies are needed, hence apart from the specialized areas dealing directly with oil and gas there is labor which will be sourced directly from these communities.

UN Sustainable Development Goals

  • SDG 5: Gender Equality
  • SDG 7: Affordable & Clean Energy
  • SDG 8: Decent Work & Economic Growth
  • SDG 10: Reduced Inequalities

Transaction Details*

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Additional Resources

  • IPP’s Name & Website
  • IPP’s Sustainability & Low Carbon Ambition Statement – Upon Request
  • Access to DATA ROOM – Upon Request
    • Draft Term Sheet
    • Information Memorandum
    • Financial Model
    • Sustainability & Low Carbon Ambition Statement
Location Map
Tarkwa Plant visit October 2018

Sustainable Packaging Manufacturer

Impact Capital Partner’s Overview

FOR INSTITUTIONAL INVESTORS ONLY – An investment alongside our EM Private Debt manager provides financing to a Sustainable Packaging Manufacturer in Ecuador whose roots trace back to 1955, when it began as a corrugated cardboard distributor primarily focused on the exportation of bananas. Since then, the company has developed into a sustainable, vertically-integrated packaging manufacturer sourcing raw material primarily from recycled paper and recycled cardboard procured through multiple local and international partnerships. Once recycled material is sorted and processed, the Sustainable Packaging Manufacturer’s state-of-the-art paper mill produces corrugated paperboard boxes, which are utilized by companies involved in Ecuador’s agricultural export industry. At all stages of the process, the company strives to minimize their impact on the environmental. In an effort to support the company’s growth projections, This financing will provide the Sustainable Packaging Manufacturer with the capital necessary to strengthen its supply chain and ensure timely supplier invoice payments.

Impact Themes / Objectives

  • Pollution Prevention
  • Waste Management
  • Capacity Building
  • Environmental Conservation
  • Equality and Empowerment

Additional Sustainability & Impact Highlights

  • As a responsible steward of the environment, the Sustainable Packaging Manufacturer’s paperboard manufacturing division holds the Forest Stewardship Council’s Chain of Custody Certification, which assures that its products are made from environmentally and socially responsible sources.
  • The company’s paper waste collection and recycling program supports economic inclusion, reaching over 7,000 individuals in its supply chain.
  • The company has developed social engagement plans to provide industrial health and safety workshops and organize community wellness and cultural activities, including soccer tournaments, crafts for children, and holiday celebrations.

UN Sustainable Development Goals

  • SDG 4: Quality Education
  • SDG 8: Decent Work & Economic Growth
  • SDG 9: Industry, Innovation & Infrastructure
  • SDG 10: Reduced Inequalities
  • SDG 11: Sustainable Cities & Communities
  • SDG 12: Responsible Consumption & Production
  • SDG 15: Life on Land

Transaction Details*

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Additional Resources

  • Issuer’s Name & Website – Upon Request
  • Term Sheet – Upon Request
  • Access to Data Room – Upon Request

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