{"id":9879,"date":"2015-04-13T09:59:48","date_gmt":"2015-04-13T14:59:48","guid":{"rendered":"http:\/\/blogs.edf.org\/energyexchange\/?p=9879"},"modified":"2015-04-13T15:00:32","modified_gmt":"2015-04-13T20:00:32","slug":"investing-in-a-low-carbon-economy","status":"publish","type":"post","link":"https:\/\/blogs.edf.org\/energyexchange\/2015\/04\/13\/investing-in-a-low-carbon-economy\/","title":{"rendered":"4 Ways to Invest in the Low-Carbon Economy"},"content":{"rendered":"

\"career-544952_640\"<\/a>Citigroup Inc. recently pledged $100 billion<\/a> for lending, investing, and facilitating deals related to sustainability, renewable energy, \u00a0and climate change mitigation. This is yet another sign that global capital markets are enormously interested in delivering capital into clean, renewable sources of energy. But you don\u2019t have to be Citigroup to invest in the clean energy future.<\/p>\n

The industry\u2019s rapid growth presents an interesting diversity of \u00a0long-term opportunities for individuals like you and me who might be looking to make investments in a low carbon economy.<\/p>\n

Fueled by an increased demand for solar and wind energy, clean energy investment<\/a> last year beat expectations, rising 16 percent to $310 billion worldwide, according to Bloomberg New Energy Finance (BNEF). Fortunately, this robust growth is representative of a general upward trend<\/a> in clean energy investment over the past decade.<\/p>\n

Although the vast majority of this money is coming from governments, corporations, and private equity and venture capital firms, people of all income levels can consider whether it is right for them to add clean energy to their investment portfolios. And, you don\u2019t need millions in the bank to make these types of investments \u2013 any investor can consider whether to put their money to use \u00a0through the four financial instruments described below.<\/p>\n

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  1. Climate\/Green Bonds<\/strong><\/li>\n<\/ol>\n

    A bond<\/a> allows entities looking to finance projects to borrow money from investors for a defined period of time at a fixed interest rate. Climate\/green bonds are used exclusively to finance new or existing climate\/green initiatives, which are defined<\/a> by the International Capital Markets Association as \u201cprojects and activities that promote climate or other environmental sustainability.\u201d<\/p>\n

    Climate\/green bonds have experienced significant success recently and constitute a large chunk of financing for clean energy investment. According to<\/a> BNEF, \u201cThese have been one of the great success stories of the past two years, increasing from a paltry $3 to 5 billion per year between 2007 and 2012, then suddenly jumping to $14 billion in 2013 and $39 billion last year.\u201d<\/p>\n

    And future prospects are bright. BNEF expects to see further rapid growth in 2015, saying, \u201cWe see the volume of green bonds doubling again this year to around $80 billion.\u201d<\/p>\n

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    1. Equities<\/strong><\/li>\n<\/ol>\n

      Equity<\/a> is stock or any other security<\/a> representing ownership in a company. An investor who believes a company\u2019s value will increase in the future might purchase equity, or shares of ownership, in that company via a stock exchange. This is a riskier option than a bond because if the company\u2019s value decreases, the investor loses money.<\/p>\n

      There are plenty of publicly-traded companies operating in the clean energy space, such as solar panel manufacturers or battery storage developers. While there are a number of market risks (embedded in any investment) that need to be carefully evaluating when making an equity investment, selecting \u00a0the right technology or venture to back can be very rewarding. For example, Tesla<\/a> is a publicly traded clean energy company whose stock price grew more than 40 percent to $222.41 on December 31, 2014. If an investor had purchased 100 shares on January 1st<\/sup> last year for about $15,000 and sold them on December 31st<\/sup>, she would have earned a hefty return of more than $7,000. For those who have no idea where to start, SustainableBusiness.com has compiled a \u201cwatch list\u201d<\/a> for green stocks and even has subcategories like solar and wind.<\/p>\n

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      1. Index Funds<\/strong><\/li>\n<\/ol>\n

        In the case of financial markets, an index<\/a> is an imaginary portfolio of securities representing a particular market or a portion of it. Indices are often the basis of mutual funds<\/a> and exchange-traded funds<\/a> (ETFs). These index funds enable investors who want to get behind an industry, but lack confidence in their abilities to identify specific winning companies, to bet on the industry at large.<\/p>\n

        Clean energy index funds might include a broad spectrum of technologies and\/or geographies, or they might focus on one technology and\/or geography. Below are some examples of clean energy index funds:<\/p>\n