Institutional investors are increasingly supporting solar power and renewable energy. In fact, just last month multiple investment organizations announced support for the International Solar Alliance’s (ISA’s) goal of a $1 trillion investment in photovoltaic solar power by 2030 and they have the power to support that goal.
Institutional investors are important to deploying solar power across the world because they represent fund managers, insurance companies, mutual funds, pension funds and other investment organizations aimed at generating long-term wealth with stable investments. As such, they’re more likely to invest in lower-risk opportunities with lower rates of return but for a longer period of time. The type of return that solar panels and arrays are good at providing.
There, were, however some things that were preventing such investors from getting more fully into the solar market. For instance, GreenBiz’ Robert Kropp wrote that “In 2008, an interpretive bulletin of the Department of Labor's Employee Retirement Investment Security Act (ERISA) strongly discouraged economically targeted investments (ETIs) by pension plan fiduciaries, stating instead that financial returns are the paramount fiduciary duty.”
That’s changing, Kropp noted. Last year ERISA repealed the directive, he said, with the following statement: “Environmental, social and governance issues may have a direct relationship to the economic value of the plan’s investment….Fiduciaries need not treat commercially reasonable investments as inherently suspect or in need of special scrutiny merely because they take into consideration environmental, social or other such factors.”
The other big thing to set things into motion for institutional investors are the changes afoot because of the COP21 agreement made in Paris last December. “Regulatory regimes have not been overhauled yet, there is anticipation among sustainable institutional investors that the time for increasing their investments in clean energy is near,” Kropp said.
Last month coming out of the Terrawatt Initiative and ISA Roundtable on April 22 the Green Infrastructure Investment Coalition (GIIC), which represents institutional investors with $43 trillion and assets and the Principles for Responsible Investment (PRI), which represents institutional investors with over $60 trillion in assets were among those that signed onto the ISA’s “Trillion Dollar Opportunity” goal.
At that time Fiona Reynolds, PRI CEO, said, “In transitioning to a low carbon environment, a move towards green infrastructure investments is a sensible response for investors. The PRI believes that the Green Infrastructure Investment Coalition can bring solar investment opportunities and investors together and become a key component of a low carbon investment strategy.”
Together these organizations and the signatories of the Paris Agreement—basically almost every country on earth, will hopefully begin increasing investments in solar power deployment across the globe. This should speed the adoption of solar power while helping to reduce the costs of deployment further.Tweet