What is the Problem?
Fossil fuels are the largest contributor towards climate change and environmental concern. Evidence of climate change can be found everywhere. The majority of damage has been done over the past century and has mainly been attributed to human activities. The damage caused will be detrimental to future generations.
What is being done?
Targets and Government policy changes are continuously being implemented to try to reduce carbon emissions, for example the Kyoto Protocol in 1997 to obtain 20% of energy from renewable sources and the Climate Change Act 2008 to reduce carbon emissions. More recently, the UK Government has published its ‘Solar PV Strategy’ that outlines its plan to increase renewable energy supply and rely less on fossil fuels. It sets a target of 1 million domestic solar installations by 2015 and to have 20GWp (gigawatts peak) of solar energy by 2020 – we are currently at 2.7GWp of solar energy. In addition to policy change, the Government has incentives in place for clean energy projects, such as Feed-In Tariffs (FiTs). The UK government is a major force in encouraging renewable energy investment.
Solar and Wind energy projects are the most popular and most efficient ways of producing renewable energy. The UK is not new to these energy sources, but more investment is required to meet these targets and to influence the global opinion on climate change.
What opportunities are available for investment?
Investors are becoming increasingly conscious of where their money is going and how it is spent. Crowdfunding has already been found to be a viable option for investors looking for a combination of above-average financial returns and a feel-good (environmental) factor. Abundance Generation, an UK regulated crowdfunding platform, has already raised £5 million from about 1,100 people and funded 7 renewable energy projects in the UK – and has a target of raising £500 million by 2020. They have also reported returns of up to 9% IRR. Investments through this platform can be made from as little at £5, opening the door to a wide investor audience.
Some investors are reluctant to invest into this asset class, maybe due to the market being very new and sometimes misunderstood, or that new smaller companies tend to very high risk. But there are a number of benefits on offer that traditional investment lack such as: renewable energy investments are often underpinned by a physical asset; the returns are uncorrelated to the mainstream markets providing a source of diversification; returns are linked to inflation; a sense of social responsibility; lower minimum investment; and certain investments offer generous tax incentives.
The environment is a growing global concern. Investors are caught between protecting the planet for future generations and achieving healthy investment returns. Crowdfunding and other investment vehicles, such as EIS, are bridging the gap. Even with smaller investments, the opportunity to make a change whilst still realising a profit is very achievable.