The world relies heavily on fossil fuels. From the fuel in your car to your house lighting, fossil fuel is the major contributor to this energy that you use. They are also the key drivers of climate change. Fossil fuels produce large amounts of carbon dioxide in the air and raise alarm about rising temperature levels.
Governments worldwide are seeking ways to replace fossil fuels and have initiated investments in safer and more feasible venues for energy. Due to this, the renewable energy sector is attracting investors from all quarters of the financial markets.
As per the Global renewable energy market outlook 2017-2025, the global renewable market sector will be around US$ 2.1 trillion by 2025. Industry players continue raising substantial capital to fund their green expansion plans.
But why is investing in clean and green energy significant? And is it an ideal investment for you? The article aims to describe renewable energy investment, its benefits, and strategies to upscale your investments.
Renewable energy is an energy that can substitute fossil fuels. It also comprises auxiliary technologies essential for the clean energy transition. For example, solar energy harnesses the energy from the sun using photovoltaic cells or solar thermal systems.
Renewable energy is produced using renewable sources like water, solar, and wind. They are also termed as clean energy as they do not produce pollution. One can invest in the renewable energy industry by purchasing stocks of listed companies in the renewable energy sector or companies making components and equipment for generating power using renewable sources. You can also invest in corporate bonds being issued by these companies.
While directly investing in the renewable energy sector is gaining traction, more options emerge to allow investors to pick alternatives for their financial portfolios. Investing in renewables is more than a simple investment.
The replenishable energy holds the potential to meet the booming energy demand and reduce fuel usage. Hence, adding clean energy to your portfolio is essential for multiple reasons:
Renewable energy is considered a way of the future, but are you ready to invest in such projects with your funds? What exactly drives investors to financially back the renewable market? Before investing in renewable energy, let us discuss some of the benefits:
Although fossil fuels remain the primary energy source, renewable energy appeared as a massive part of the energy sector. It has witnessed impressive growth in the past years.
As per the International Energy Agency, Clean Energy receives a $1.7 investment for every dollar going into fossil fuel in 2023. The reason behind it is evident. Fossil fuels are finite, non-replenishable, and accompany unpredictable costs.
The anticipation and demand for lower fossil fuel has decreased capital expenditures in oil and gas. As per Bloomberg NEF’s Energy Transition Investment Trends 2022, the global investment in transitional technologies is expected to reach $2 trillion by 2025.
The rising climate change concerns have also contributed to renewable growth as people search for alternative investment options. The financial inflows and technological advancements make it an elite alternative investment.
Strong economic growth and energy security have propelled many towards clean alternative investment. The rising capital requirements for clean energy investments have highlighted the need for capital recycling.
However, the structural issues in the under-developed bond market pave the way for undesirable events, essentially in these investments, as they are often long-term. Investors and institutions lend out capital which gets stuck till it is paid back.
Therefore, structured financial mechanisms, capital market tools, and risk mitigation can facilitate private capital flow to clean energy projects.
The Government of India has announced plans to issue sovereign green bonds (SGB) to mobilise the resources for green infrastructure. The announcement came from Ms. Nirmala Sitharaman, Union Minister for Finance and Corporate Affairs, on February 1st, 2022. For this purpose, two tranches of INR 8000 crore each were raised on 25 Jan 2023 and 9 Feb 2023. The funds raised from this initiative will be utilised by the public sector aimed at lowering the carbon footprints of the economy.
Renewable energy can contribute to achieving green growth goals. It is both worthwhile and meaningful. The renewable energy sector has a huge potential for alternative investments. To ensure that your investment in this sector will benefit the portfolio, it is essential to determine the revenue stream of the investment. It will help you evaluate options and make informed decisions.
Grip is a discovery platform for alternative investments. It simplifies the process to help you get the most out of your investments. Explore Grip today to learn more about different alternative investment options.
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