Author Topic: Investing for environmental impact  (Read 505 times)

Frugal-Investor

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Investing for environmental impact
« on: June 15, 2018, 12:12:40 PM »
I've been researching investments looking for a very particular niche for 1-2% of my investible capital. My goal has been to find investments that translate my dollars into renewable power generation equipment investments, generate returns better than bond markets (AGG as benchmark) and create a tiny bit of additional leverage for renewable power generation and related markets. I found two options and made one investment. I predict more investment options to open up in time.

Initially, I was guessing that markets are just now developing to finance investments in renewable energy. And that the markets that do exist are inefficient (meaning also: exciting, interesting and with outsized risks and opportunities), potentially with initially higher returns than when things settle down and mature. Here's why:

Solar and wind power generation has reached a tipping point of the lowest cost per kwh generated. US unsubsidized costs are now as low as $.025-$.04/ kwh for large-scale solar and wind, partly as a result of generation prices dropping 5-20% per year for a bunch of past years. An example: https://www.utilitydive.com/news/austin-energy-solar-ppa-could-be-lowest-priced-in-us-analysts-say/513453/

Though the business case is pretty good for residential solar (for me in the mid-Atlantic US with a south-facing roof), a residential implementation strikes me as completely sub-scale. That is, viewed purely as an investment where I plug in capital in order to generate electricity and a flow of future cash (in the form of cost avoidance), a residential solar investment should lose every time to a commercial or utility scale solar investment if I can find such an investment.

With asset life of solar panels and wind turbines well above 30 years, the business cases for commercial and utility scale investments should look wonderful. Consequently, there should be a big ramp in commercial and utility scale renewable power generation seeking investment. In fact, these should be perfect assets to finance with dedicated bond funds (perhaps with energy storage investments lagging a few years and helping to balance the grid). At first, I was aiming to find an ETF that aggregated debt-financed utility and commercial-scale renewable power generation. Though I didn't find anything, this type of ETF seems inevitable (please comment if you know if such an ETF).

Here's what I did find:
(1) TRINE  -- https://www.jointrine.com/
The Swedish company TRINE does crowdfunding of small scale solar investments in Africa. It gives a triple benefit of return on investment, mitigating carbon and bringing economic and community benefits from making lower cost energy available. But, it doesn't have a US subsidiary and an investment in TRINE is regarded as direct ownership of a foreign investment account for a US taxpayer like me, which ruled it out.  Happily, this took my research in a crowdfunding direction.

(2) WunderCapital -- https://www.wundercapital.com/
At present for accredited investors only, WunderCapital bundles up the financing needs of multiple commercial scale solar project and matches them with a crowdsourced pool of investor dollars. I chose an investment fund with 60 month term, $1,000 minimum and 7.5% target interest rate. Since the fund invests in multiple projects, I get a degree of diversification.

Initially, I explored structuring the WunderCapital investment under an outside self-directed IRA, but found the additional complexity and outside fees off-putting. So I went with a direct investment. My interaction with WunderCapital from initial exploration to investment and on-going management has been stellar. Their operation seems small but both efficient and well buttoned-up. They charge 0.25% of invested capital as an annual management fee, which seems like a minor drag factor given the 7.5% return. I am interested in thoughts on all this and additional similar options or experiences.