INVESTING TOWARDS AFFORDABLE AND CLEAN ENERGY



As a response to the climate emergency and social crises, the United Nations has established a set of Sustainable Development Goals, to be achieved by 2030. These are organized in 17 concrete objectives to tackle global issues in order to reach a sustainable and peaceful future for everyone, everywhere. The SDGs aim to bring together all countries, private companies, and individuals to promote a prosperous future while protecting the planet. They achievement of a particular goal is often interlinked with the other, as will be seen in our series of articles.


In this article, Kanopé analyzes investment alternatives which contribute to the 7th SDG, aiming to provide access to affordable, reliable, sustainable and modern energy for all.

All over the world, there are hopeful signs as energy is becoming more sustainable and widely available. Yet, while poorer countries now have better access to electricity and energy efficiency continues to improve with renewable energy increasing its share of the electricity sector year by year, our economies are vastly dependent on fossil fuels. Fossil fuels such as coal, oil or gas produce large amounts of greenhouse gases, which has a harmful impact on the environment and people’s wellbeing.


Robust energy systems allow all sectors to thrive, from businesses to medicine, education to agriculture, communications to infrastructure. Indeed, having access to safe, clean, and affordable energy can improve the lives of women and girls who are the ones spending hours to fetch water in poor rural areas, allow clinics to store vaccines and give the opportunity to children to do their homework at night or eat warm food.


Affordable and clean energy is therefore a transversal goal which will support all sectors and many of the other SDGs.

KEY FIGURES

Despite the progresses in energy access mentioned above,13% of the global population still lacks access to modern electricity. In sub-Saharan Africa, an estimated 573 million people are not connected to the grid.


Furthermore, 3 billion people, almost half of the world population, still rely on coal, wood or animal waste for cooking and heating. Besides the environmental impacts this causes, it also leads to indoor air pollution, which has caused 4.3 million deaths in 2012, 60% of which were women and girls.


As of today, around 20% of the global energy consumption originated from renewable sources such as wind, water, and the sun. This is encouraging but largely insufficient, as the energy sector remains the most polluting one, contributing to 60% of global GHG emissions.


The targets of SDG 7 include ensuring universal access to energy by 2030, emphasizing the need for investments in clean energy research, as well as infrastructure expansion and technology upgrade in order to supply clean and sustainable energy. This will bring development to the areas where it is most needed while ensuring our impact on natural systems remains minimal.

WHAT INVESTMENT SOLUTIONS EXIST TO CONTRIBUTE TO THIS SDG?


It is nowadays possible to demand more than a financial return adapted to a risk level from your investments. Impact investing is placing a third dimension at the core of your investment strategy: to have a positive impact on the world.


Regarding clean and affordable energy, the investment themes* are the following:

  • Access to (clean) energy

  • Transition from fossil to clean energy

  • Energy efficiency

Before moving forward with the presentation of investment solutions we have identified, we’d like to remind you that the ensuing presentation does not constitute a buy, sell, subscription or advice in financial investments offer from Kanopé Impact. This presentation analyzes data and numbers without accompanying them with comments or value judgements regarding their worth for the reader. This article seeks to illustrate how an investor’s capital can contribution to solving global issues. The performance or numbers mentioned are estimates from asset managers communicated over a given time period and are therefore in no way a guarantee of the value of said investment in the future. If you wish to invest financially, please contact your financial advisor who will be able to guide you towards your objectives given your civil, fiscal, and asset situation while ensuring an adequate investment.

Access to clean energy


1 billion people still function without electricity, mainly rural dwellers in developing countries. Providing access to energy, which goes beyond electricity, is key for the establishment of prosperous societies.


The publicly traded Swedish company Climeon seeks to provide access to clean energy by exploiting the difference in temperature between hot and cold water to generate clean electricity. Using geothermal energy, a vastly untapped source due to limitations of existing technologies, Climeon efficiently produces electricity which is used by various sectors, including maritime, steel industry and wastewater treatment.


The Caribbean Basin Sustainable Energy Fund also contributes to this first theme by investing in clean, small and medium scale renewable energy projects in Central America and the Caribbean. It consists of a blended finance fund with investments from multilateral entities, development agencies and private impact investors and has an estimated net IRR of 10–12%.


Transition from fossil to clean energy


Despite increases in the share of renewable energy in the total energy consumption, this proportion (approximately 20%) remains too low for a sustainable access to energy in the future. The challenge is to increase the share of renewable energy in the heat and transport sectors, which together account for 80% of global energy consumption.


While electric vehicles (EV) are more eco-friendly for transportation, the manufacturing of the batteries and their disposal at the end of the lifecycle can be problematic for the environment. The startup Betteries seeks to respond to the issue of EV batteries disposal, and repurposes or upcycles them for a second life. This saves CO2 and protects scare resources while accelerating the transition to renewables.


Energy efficiency


By reducing energy intensity, calculated by dividing total primary energy supply by GDP, we can decouple economic growth from climate change and foster prosperous communities which have a minimal impact on the natural environment. This comes through improving efficiency and reducing the use of fossil fuels in the current energy mix.

One of the largest obstacle to harnessing renewable energies such as wind and sun despite their abundance is the large investments required for infrastructure and set-up. SunFunder tackles this problem by providing debt capital to companies in Africa and Asia which install solar panels and permit last-mile distribution of energy to end-users. Over 5 million people now have access to solar energy thanks to the projects funded by a mix of corporate, debt-funds, and private investors.


Sangam Ventures also contributes to improvements in energy efficiency by investing in early stage innovative solutions related to energy transition and the circular economy. It focuses on seed to series-A investments in India and surroundings, and targets a 15% IRR with 4 years commitment period and 6 years lock-in period.


AND NOW?


If you want to become an impact investor, contact your financial advisors specialized in impact investing. They will be able to support you in measuring and connecting the three dimensions that are risk, return and impact, according to your property status and investor profile.

#ImpactInvesting #SustainableFinance #SDG #FamilyOffice #BroccoliVirus #ClimateChange

*Toniic - 2020

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