Sustainable Investment is Trending

As the push towards a more renewable future gains more and more traction around the world, financiers are increasingly getting on board. Many different investment funds and other financial institutions have launched new programs specifically aimed at supporting sustainable energy projects. These efforts are diversifying portfolios and are creating great positions in the rapidly changing energy market, in addition to supporting the transition from fossil fuels to new energy alternatives.

The Big Banks No Longer Want Coal

Over the last several months, many major banks throughout the world announced plans for their intent to divest from coal or help the companies they finance make the transition away from coal. This will have a big impact locally, as some of the biggest lenders in the world expect their clients, including electric utilities, to transition to renewable energy options.

The Energy and Policy Institute reported cited the following major banks as standout examples:

• Citigroup (USA-based) said that it will be requiring all of its power sector clients with coal generation to provide annual greenhouse gas reduction strategies for review each year. It will be evaluating company targets and their capacity to shift away from coal and diversify options.
• Goldman Sachs (USA-based) announced plans to engage the power sector companies it finances to understand their strategies to move away from coal, reduce carbon emissions, and align with the Paris Climate Agreement.
• Morgan Stanley (USA-based) said that it will be working with companies it finances to transition away from coal and reduce carbon emissions.
• BlackRock (USA-based), one of the world’s largest investment management firms, said it will divest from companies that generate more than 25% of their revenue from thermal coal production. It will also be taking a closer look at other businesses that rely on coal as an input too, to encourage transition from coal reliance.
• Barclays (UK-based) announced its goal to become a net zero bank. It will be prohibiting financing to clients with more than 50% of their revenue from thermal coal in 2020, down to 30% in 2025, and 10% in 2030.
• BNP Paribas (France-based) said it is accelerating its pullout from coal. It will not be accepting any new customers with a share of coal revenue over 25%. It also seeks to transition all of its electric utilities that it funds to be coal-free by 2030.

Inaugural Green Bond

In addition to what the world’s biggest banks are doing, other firms are finding new ways to fund renewable projects.

Earlier this year, the PNC Financial Services Group, Inc. (NYSE: PNC) announced the closing of its inaugural Green Bond issuance. The proceeds will fund eligible projects that promote a transition to a low-carbon economy and offer sustainability benefits including renewable energy, energy efficiency, and green buildings.

"We recognize that environmental issues, including climate change, are impacting our business, our clients and our communities," said Mike Lyons, executive vice president and head of PNC's Corporate & Institutional Banking and Asset Management Group. "This green bond issuance is a natural progression of our efforts to balance financial priorities and environmental considerations in support of the transition to a low carbon economy."

Sustainalytics, a global independent provider of corporate governance research and ratings, has reviewed and verified that PNC's Green Bond Framework is consistent with the current Green Bond Principles, as published by the International Capital Market Association.

7 Solar Projects Funded

In terms of recent direct investments made in Indiana, Alchemy Renewable Energy (ARE), Missouri-based portfolio company that owns and operates renewable energy facilities, announced the financial closing for a 44.51-megawatt (DC) solar, renewable energy portfolio across Indiana, with joint venture partner Telamon Enterprise Ventures LLC (TEV).

The portfolio was developed by the Indiana Municipal Power Agency (IMPA). Projects will be taking place in Gas City, Centerville, Crawfordsville, Richmond, Scottsburg, Tell City, and Tipton. The total investment figure has not been disclosed.

ARE’s parent, Monarch Private Capital (MPC), secured the tax equity financing of a seven-solar-project portfolio in the state of Indiana through a partnership with a large, domestic life insurance company.

“Insurance companies are increasingly attracted to providing tax equity for utility-scale solar projects,” said Chuck Kaiser, Monarch Private Capital’s Managing Director of Financial Investments. “Expected returns are substantially higher than those available in the investment-grade fixed-income market for a relatively low-risk investment.”

An investment of this size will have a positive environmental impact on communities in Indiana and surrounding states by reducing approximately 39,000 megatons of CO2e emissions in the first twelve months of operations (the equivalent to removing 8,500 passenger cars from the road for a year).

Money Where Their Mouth Is

All of these funding endeavors, and the many more like them, could likely be remembered as some of the biggest catalysts that helped our world make the switch to a cleaner future in renewable energy generation. The will to change has been growing for years. Now, with more support in place, we’ll have the means. Financial institutions are truly putting their money where their mouth is this year. They want a cleaner world too, and they’re clearly willing to invest in it.