This past Saturday, 7 March, the Time to Act March took place in London to bring awareness to the problems of climate change. This event comes just before the General Election to urge government to act on the climate change issue. The event started at Lincoln Inns Fields, leading to the rally outside of Parliament. This year’s event brought over 20,000 in attendance. Last year the People’s Climate March in September saw 40,000 march in London. The campaign aims for a 100% renewable energy future.
The UK Government already has a set target for their renewable energy usage, but the 2015 United Nations Climate Change Conference in Paris at the end of this year may mean a universally legally binding agreement that aims to limit the global temperature increase to 2 degrees above pre-industrial levels, bringing the need for greater investment into renewable energy. According to the World Energy Outlook 2014, if the 2 degree emissions agreement is made, this would require $53 trillion in cumulative investment globally by 2035.
It is also an important point to mention, that if a 2 degree target agreement is reached, many of the fossil fuels cannot be used. In research from Carbon Tracker and the Grantham Research Institute, “60-80% of the coal, oil and gas reserves of publicly listed companies are ‘unburnable’”. This is leading many of the listed energy companies to be over-valued as many of their assets and investments will be ‘stranded’.
Big time investors have taken action as well. Chief Investment Strategist at Grantham Mayo van Otterloo (GMO), Jeremy Grantham, has already begun to reduce his exposure to old school energy firms.
If marching isn’t your thing, there are several ways to support renewable energy and make a profit. There are several investment products that use renewable energy projects in the UK – from crowdfunding, EIS to direct investment, there is an answer for ethical investors of all kinds.
Crowdfunding and Peer to Peer
Peer to Peer (P2P) lending, crowdfunding and other alternative finance platforms can offer access to investments that benefit UK renewable energy from a low minimum investment level. The alternative finance sector allows investors to see where their money is going and support companies they believe are ethical.
Abundance Generation is one of the leading platforms in this space. They offer clean energy crowdfunding investments that generate renewable energy for the UK. This space will be the easiest for most investors to enter due to the low minimum investment levels, with returns in the range of 7-8% IRR. Other clean energy projects are available across different platforms in the UK
Peer to peer investments will soon be allowed within ISAs, offering generous tax benefits along with social returns.
EIS/BPR/VCT
The Enterprise Investment Scheme (EIS), Business Property Relief (BPR) and Venture Capital Trust (VCT) structures lend themselves nicely to renewable energy investments. In fact many product providers specialise in clean energy and offer very attractive returns which also qualify for several tax reliefs. They have specialist knowledge that allows them to source the best investments that offer competitive returns.
While the Budget 2014 excluded renewable subsidies, Feed in Tariffs and ROC’s from the 5 April, from EIS and VCTs, we are still seeing a major focus on the renewable energy sector within these tax efficient investments in the meantime.
Conclusion
There are a variety of sectors in the renewable energy space, such as hydro, wind and solar – each having their own investment case and risks associated with them that should be considered. The social, financial and diversification benefits can have a significant impact not only on your portfolio but on the environment.