Impact Investing In Renewable Energy

Impact Investing In Renewable Energy

Impact investing can offer a compelling pathway to influence social and environmental outcomes while achieving financial returns. In recent years, the focus on sustainable investment has intensified, particularly in renewable energy. As the planet addresses climate change and its many challenges, renewable energy has emerged as a main focus. 

This article explores the concept of impact investing within the renewable energy sector, examining its potential to drive innovation and promote a greener planet. By understanding the dynamics of impact investing and its alignment with renewable energy, investors can make informed decisions that yield financial benefits and contribute significantly to environmental sustainability.

What Is Impact Investing?

Impact investing is a strategy that seeks to produce positive, quantifiable social and environmental benefits while also delivering financial returns. This strategy breaks from traditional investment tactics by prioritizing projects that benefit society and the environment. A key component of impact investing is the consideration of Environmental, Social, and Governance (ESG) factors, which guide investors in selecting initiatives that align with ethical and sustainable practices.

For many, ESG factors are important because they assess the direct and long-term impacts of investments on the environment (E), social structures (S), and governance (G) of investing entities. In the context of renewable energy, environmental factors are particularly significant, focusing on reducing emissions and promoting biodiversity. Social factors might involve assessing labor practices and community engagement, while governance involves the ethical management of companies, including transparency and shareholder relations.

As investors seek to align their portfolios with their values, ESG criteria serve as a tool for identifying opportunities that can drive substantial environmental change and offer sustainable growth potential.

Please Note: ESG scores are provided by various third-party entities that may use different rating formats to communicate scores. These entities include, but are not limited to, Sustainalytics, MSCI, S&P Global, and the Dow Jones Sustainability Indexes. 1

What Is Renewable Energy?

Renewable energy refers to power generated from natural resources that are continually replenished. This includes energy sources like wind, sunlight, rain, and geothermal heat. Unlike fossil fuels, which are finite and can produce harmful environmental impacts, renewable energy sources are sustainable and emit little to no greenhouse gasses during operation. Transitioning to renewable energy is essential in combating climate change. It offers a pathway to decarbonize the global energy supply and reduce the extensive ecological footprint associated with traditional energy systems. 

The benefits of renewable energy extend beyond environmental impact; they also include increased energy security, lower energy prices in the long run, and resilience against fuel price volatility. As technology advances and scalability increases, renewable energy continues to become more accessible and cost-effective, encouraging global use.

Is Renewable Energy A Good Investment? 

Environmental Considerations

Renewable energy investment is often lauded for its positive environmental impacts, which is a cornerstone consideration for impact investors. Investors contribute to decreasing greenhouse gas emissions by concentrating on renewable sources. These energy sources, such as wind and solar, do not produce carbon dioxide or other harmful emissions during their operation, making them essential tools in the global fight against climate change. 2

Moreover, renewable energy projects often contribute to environmental conservation efforts, such as reducing air and water pollution associated with coal and natural gas plants. 3 By minimizing ecological degradation, renewable energy investments can help preserve the planet for future generations, aligning closely with the goals of impact investing.

Societal Considerations

From a societal perspective, renewable energy investments can profoundly impact local communities. First, they create jobs. The renewable energy sector is labor-heavy. It often requires a substantial workforce for installations, upkeep, and management, which can stimulate local employment opportunities. According to the International Renewable Energy Agency (IRENA), renewable energy jobs reached 12 million globally in 2020, highlighting the sector’s role as a major employment driver. 4

Additionally, renewable energy initiatives can enhance public health by decreasing pollution-related illnesses. Areas that rely heavily on fossil fuels for energy production often struggle with air quality issues, leading to respiratory problems, heart complications, and other health concerns. 5 Switching to renewable energy can have a direct beneficial effect on the health of communities.

Economic Considerations

Economically, renewable energy can present a solid investment opportunity. The costs of renewable technologies have fallen dramatically over the past decade. For example, since 2010, the price of solar photovoltaic (PV) panels has dropped by more than 80%, making solar installations increasingly competitive with conventional energy sources. This cost reduction extends to wind and other renewable technologies, leading to potentially higher returns on investment. 6

Furthermore, renewable energy can help stabilize energy prices. Traditional energy sources like oil and gas are subject to market fluctuations, leading to volatile energy costs. Renewable energy, however, has low operational costs after being installed, offering a more predictable and lower price over time. 7

Governmental Considerations

Worldwide, governments are introducing incentives to promote the adoption of green energy, like tax credits, grants, and rebates. For example, the U.S. government offers various federal tax credits for solar and wind installations, enhancing these investments’ economic attractiveness. 8

International agreements like the Paris Agreement compel countries to increase their use of renewable energy to mitigate climate change. 9 Such policies ensure regulatory support for renewable energy and enhance the security of investments in this sector.

Current Trends Affecting Impact Investing In Renewable Energy

The renewable energy sector is advancing quickly, fueled by technological advancements, policy backing, and growing public interest. Recent trends indicate a strong shift towards more integrated and sustainable energy systems, with significant advancements in energy storage, smart grid technology, and reduced wind and solar power costs. These developments make renewable energy more efficient and accessible, increasing its attractiveness as an investment option.

Technological Advancements

Technological innovation plays an integral role in enhancing the viability and appeal of investments in renewable energy. Improvements in technology have increased the efficiency and productivity of renewable energy sources. For instance, modern wind turbines can generate more power at lower wind speeds than their predecessors. 10 Similarly, the efficiency of solar panels continues to increase, allowing for greater energy generation even in less sunny environments.

Energy storage technology has also seen significant breakthroughs. Batteries and other storage solutions are crucial for managing the intermittency issues associated with solar and wind energy. Innovations in battery technology, such as lithium-ion improvements and solid-state battery development, are helping stabilize renewable power supply and integrate it more seamlessly into existing grid infrastructures. 11 These technological advancements enhance renewable energy’s reliability and grid compatibility, making it a more viable and attractive investment.

Policy

Policy developments are equally influential in shaping the renewable energy landscape. Governments worldwide are ramping up their support for renewable energy through various legislative measures to meet international climate targets. For instance, the European Union’s Green Deal is designed to turn Europe into the first climate-neutral continent by 2050, strongly emphasizing expanding renewable energy sources. 12

In the United States, recent policy initiatives include substantial investments in renewable energy infrastructure and incentives for clean energy projects as part of broader economic recovery plans. 13 These policies promote the adoption of renewable energy and encourage private and institutional investors to allocate capital towards sustainable energy projects. This, in turn, reassures such investments’ long-term stability and profitability.

Public Interest

Public interest and societal demand play important roles in accelerating the adoption of renewable energy. As awareness of climate change and its impacts grows, consumers are more attracted to supporting green energy with funds. Research has demonstrated a shift in consumer preference with the rising popularity of sustainable products and services. 14

Public interest also influences corporate policies, with many companies committing to renewable energy targets. 15 This corporate shift increases direct investment in renewable energy and boosts the overall market demand, incentivizing investors to focus on renewables.

Challenges Of Impact Investing In Renewable Energy

Impact investing in renewable energy is increasingly seen as a crucial step towards sustainable development and combating climate change. Like any investment sector, however, it presents specific challenges that investors must navigate to achieve financial returns and environmental impact. These challenges include:

Identifying and Assessing Investment Opportunities: One of the primary challenges in the renewable energy sector is locating and evaluating viable investment opportunities. Unlike traditional energy sectors with well-established market paths and technologies, renewable energy can involve newer technologies or business models that may be more difficult to assess for feasibility and profitability. 

Evolving Technological Risks: Investing in renewable energy often involves new or rapidly evolving technologies. While innovation drives the sector forward, it also carries inherent risks. Technologies in developmental stages may not perform as expected in practical, large-scale applications or may become obsolete as newer technologies emerge. This can impact the expected lifespan and profitability of an investment.

Regulatory and Policy Uncertainty: Renewable energy policies and incentives can be highly variable, depending on local and national government support, which can change with political climates. Subsidies, tax credits, and regulatory frameworks play a significant role in the financial viability of renewable energy investments. Any policy shifts can drastically alter the economic landscape of these projects, affecting long-term investment returns.

Environmental and Permitting Challenges: Despite being more sustainable, renewable energy projects are not immune to environmental challenges. They require significant land and mineral use and can face public opposition. Securing the necessary permits and environmental clearances can be time-consuming and unpredictable, delaying project timelines and adding to costs.

How to Approach Impact Investing In Renewable Energy

Successfully navigating the complexities of impact investing in renewable energy involves strategic planning, partnerships, and a strong understanding of the market and the technologies. Here are several strategies that can help investors address the challenges mentioned previously:

Conduct Thorough Research: Investors should conduct thorough research to understand the technological, financial, and operational aspects of renewable energy projects or the companies sponsoring them. This involves assessing the management team’s experience and track record, the technology’s feasibility, and the project’s financial forecasts.

Consider Geographic Constraints: The viability of renewable energy projects can vary significantly by location due to differences in sunlight intensity, wind patterns, and local regulatory environments. Investors should perform geospatial analysis to identify regions with the highest potential for renewable energy generation and consider local policies that could affect project viability.

Properly Diversify: To manage risks related to market volatility and off-taker reliability, investors can diversify their portfolios across different types of renewable energy technologies, geographical regions, and contract types. This diversification helps spread risk and stabilize returns, as markets and technologies will react differently to economic and regulatory changes.

Get Expert Advice: Work with financial advisors and consultants specializing in renewable energy who can provide guidance. These professionals can provide insights into the latest trends, emerging technologies, and regulation changes, assisting investors in making well-informed decisions and strategically positioning their investments for sustained success.

Let Us Help You With Impact Investing In Renewable Energy

At Colorado Capital Management, we are deeply committed to the transformative potential of impact investing in renewable energy. We understand the pivotal role renewable energy plays in promoting sustainability and reducing environmental impact while providing opportunities for financial returns.

Given its technical complexities and regulatory nuances, the renewable energy sector requires a sophisticated approach. However, you don’t have to tackle these challenges alone. Our dedicated team, experienced in impact investing, is here to guide you every step of the way.

We monitor the latest advancements and shifts within the renewable energy investment sector to keep our strategies up-to-date and aligned with current opportunities. We aim to help our clients make informed, impactful investments that yield financial benefits and contribute to the global transition toward green energy sources.

If you are ready to get involved with impact investing in renewable energy, we invite you to learn more. Together, we can harness the power of renewable energy and create lasting value for our communities and your investment portfolio. Schedule a complimentary meeting today to discover how your investments can make a difference and drive the change towards a healthier planet. 


References:

  1. https://www.investopedia.com/company-esg-score-7480372
  2. https://education.nationalgeographic.org/resource/renewable-energy-explained/
  3. https://www.energy.gov/eere/environmental-impacts-clean-energy
  4. https://www.irena.org/News/pressreleases/2021/Oct/Renewable-Energy-Jobs-Reach-12-Million-Globally
  5. https://www.hsph.harvard.edu/c-change/subtopics/fossil-fuels-health/
  6. https://www.nrel.gov/news/program/2021/documenting-a-decade-of-cost-declines-for-pv-systems.html
  7. https://www.iisd.org/articles/deep-dive/canadian-energy-security-renewables
  8. https://tax.thomsonreuters.com/blog/renewable-energy-tax-credits-geothermal-solar-biomass-wind-power-and-more/
  9. https://unfccc.int/most-requested/key-aspects-of-the-paris-agreement
  10. https://www.energy.gov/eere/wind/next-generation-wind-technology#:~:text=Modern%20wind%20turbines%20are%20increasingly,averaging%202.15%20MW%20of%20capacity
  11. https://www.energy.gov/sites/prod/files/2019/07/f64/2018-OTT-Energy-Storage-Spotlight.pdf
  12. https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6691
  13. https://ec.europa.eu/commission/presscorner/detail/en/ip_19_6691
  14. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/consumers-care-about-sustainability-and-back-it-up-with-their-wallets
  15. https://www2.deloitte.com/us/en/insights/industry/renewable-energy/renewable-energy-industry-outlook.html
Lee Strongwater, Senior Financial Advisor
Senior Financial Advisor

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

Scroll to Top
Jason Black, Financial Advisor (CFP)

Jason Black, CFP ®

With a drive to live purposefully and passionately, Jason focuses on helping clients to live in abundance.

Jason is a partner and senior advisor at Colorado Capital Management.  He brings more than 15 years of varied experience working in the financial services industry. He joined CCM after a long search to find the perfect firm that aligned well with his values and mission. Jason is passionate about helping individuals and families live abundant and intentional lives. He is proud to be part of a Certified B Corporation, doing meaningful financial and investment planning for clients, while also focusing on socially responsible business practices and making a positive impact. As a Chartered SRI CounselorSM, Jason has a strong background and keen interest in sustainable investing and enjoys helping clients understand the merits of this approach. Jason is also a Certified Financial Planner™ and has a bachelor’s degree in business administration from the University of Colorado. 

Before joining CCM, Jason worked with Jackson National as a consultant for financial advisors. He helped create meaningful connections with families, creative asset allocation strategies, and tax-advantaged retirement-income solutions. During his tenure there he worked with over four thousand financial advisors across the country, was recognized multiple times as consultant of the year, and also managed a team of twenty-five individuals. 

Jason is happily married to his wife, Bridget, of thirteen years, who he met while in college at CU. Together they have a son and daughter, and a Frenchie named Coco Disco. They live in the Whisper Creek neighborhood of Arvada. When Jason is not at work, he and his  family can often be found making turns in Summit County, wakesurfing in Glendo, WY, cooking, dancing and traveling.

Erica Loughrey, Associate Financial Advisor

Erica Loughrey

Erica is passionate about providing purposeful advice to help clients enjoy a meaningful life.

Erica is an advisor at CCM. She joined the firm in 2021, fulfilling her desire to work for a values-based company with a deep commitment to making an impact. She moved from her hometown of Anchorage, Alaska and quickly fell in love with the sunny and beautiful state of Colorado. She brought with her prior experience as a para-planner and is delighted to be engaged in a profession that empowers individuals to flourish financially. She believes strongly in exceptional client service and creating lifelong generational relationships.

In 2022, she accomplished two of her major career goals, finishing her master’s degree in financial planning (MSFP) and earning her Certified Financial Planner™ designation.

Erica enjoys spending time outdoors and traveling to exotic locales. In her free time, you can find her out skiing, hiking, scuba diving, practicing yoga or jetting off to new places to explore. She has a never-ending list of travel plans, having already visited over 20 countries, and feels lucky to have so many wonderful opportunities and adventures.

Lee Strongwater, Senior Financial Advisor

Lee Strongwater, WMS

An entrepreneur and world traveler, Colorado Capital Management vice president and co-owner Lee Strongwater brings a global perspective to investments and life planning.

For more than 15 years, Lee has passionately assisted clients with their financial planning and portfolio management needs. He especially enjoys helping them live more meaningful lives and invest in ways that are aligned with their values. Lee holds a bachelor’s degree in political science from the University of Colorado and a master’s degree in international affairs from Columbia University. He also holds the Wealth Management Specialist (WMS) certification.

Before joining Colorado Capital Management, Lee was a managing partner at Strongwater-Schott, a fee-only investment management and financial planning firm in Denver. Prior to that, he was an entrepreneur who helped start and manage several small firms, including a children’s product company that went public in 2007.

Lee is an active volunteer for several organizations. He is a past President and current member of the Board of Directors for the Boulder Jewish Community Center, an organization that is highly respected on both a local and national level. Lee is also on the Investment Committee of Girl Rising-Global Education, a venture philanthropy fund that invests in social entrepreneurs with culturally-relevant ideas. The fund’s investments promote gender equality and improve educational outcomes for girls and boys living in poverty in Kenya and India.

Lee is married and has two daughters. He enjoys hiking, skiing, traveling—mostly to Mediterranean countries—and trying out new recipes from his journeys. When he’s not on the go you can find him engrossed in a book.

Steve Ellis, Senior Financial Advisor

Steven Ellis, CFA

Steve Ellis has spent his career making an impact, so it’s not surprising that Colorado Capital Management’s founder and president launched the firm’s entry into impact investing.

He brings over 30 years of experience as a financial advisor to high net worth clients. His early work included teaching college courses in accounting and finance, consulting for a major accounting firm, and researching and acquiring investments as the chief due diligence officer of a leading national financial planning firm. Since 1989, he has advised individual and institutional investors on the management of their wealth. Steve is a Chartered Financial Analyst (CFA), holds a business degree from the University of Colorado, magna cum laude, and a master’s degree from Cornell University.

Steve launched the firm’s entry into impact investing in 2012 and is committed to helping build the field. Steve is a passionate speaker on the topic. He has taught about impact investing at various conferences and classes around the country, including as a past faculty member at Middlebury Institute of International Studies. He is listed in the Who’s Who in Impact Investing.

Steve is married, with two daughters, enjoys hiking, biking, skiing, tennis and bridge, and is actively involved in the community. He has served on numerous boards and committees for a wide array of nonprofit organizations, including the Boulder JCC, Rose Community Foundation, Jewish Family Service, and Friendship Bridge. His passion for impact and community service helped lead Colorado Capital Management to become a Certified B Corporation and to build a strong culture of volunteerism and philanthropy.