Strategies for Investing in Renewable Energy
Joost Notenboom
Explore how investors can optimise renewable energy investments by balancing financial returns with responsibility and inclusion. Discover strategies for financing, due diligence and unlocking value in green energy projects.
Explore how investors can optimise renewable energy investments by balancing financial returns with responsibility and inclusion. Discover strategies for financing, due diligence and unlocking value in green energy projects.
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Strategies for Investing in Renewable Energy
17 mins 2 secs
Key learning objectives:
Understand the driving forces behind investor appetite for renewable energy
Outline practical investment strategies for financing and owning renewable energy projects
Understand how to incorporate responsible business practices into due diligence frameworks
Outline opportunities for value protection and creation
Overview:
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Renewable energy offers a compelling combination of market opportunity and sustainability impact. The sector’s transition from subsidy dependence to standalone commercial viability makes it particularly attractive. Investors can achieve steady returns through mechanisms like long-term contracts and inflation hedges. A growing focus on climate-aligned strategies, as seen in pension funds reallocating billions towards green investments, is a key driver. Investors are increasingly motivated by dual returns—financial gains coupled with measurable sustainability impacts.
- Purchasing debt or equity – Direct investments in listed companies like Iberdrola or through private market intermediaries. Exchange-traded funds (ETFs) also offer diversified exposure
- Acquiring assets – Direct ownership of solar, wind, or battery projects
- Becoming lenders or owners – Providing financing to projects or owning renewable infrastructure
How can investors ensure responsibility in their renewable energy ventures?
The EU’s Sustainable Finance Disclosure Regulation (SFDR) encourages investors to consider potential negative impacts, such as biodiversity risks or supply chain issues. Responsible practices can be embedded into agreements through shareholder clauses, side letters, or periodic reporting frameworks.
Ensuring responsible operations not only aligns with regulatory expectations but also mitigates risks and enhances project credibility. For instance, biodiversity concerns must be addressed during planning stages to avoid costly setbacks, as demonstrated in the Valeco wind farm case.
Thorough pre-investment due diligence is crucial for identifying environmental, social, or governance risks that could undermine a project. Outputs typically include red flag reports that highlight risks and recommend mitigation measures. Failure to account for risks can result in financial losses and reputational damage. For example, a renewable energy developer faced costly dismantling of its wind farm due to ecological risks that were overlooked during planning.
Sustainable business practices contribute to cost reductions, enhanced EBITDA margins, and long-term market value. Initiatives such as energy efficiency, waste reduction, and employee retention generate tangible financial benefits.
These loans tie financial terms to sustainability performance metrics, such as emissions reductions or diversity targets, incentivising companies to adopt responsible practices while offering quantifiable value creation opportunities.
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Joost Notenboom
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