Why invest in renewable energy?
It is clear to Australian Ethical that global energy policy continues to shift towards supporting a lower emissions-intensive economy. This policy shift is most pronounced in the power generation sector where it can be stated categorically that the majority of advanced nations are seeking to reduce the carbon intensity of their energy sector. Admittedly, some nations are more advanced or ambitious than others, but the direction is the same.
Renewable energy has a major, ongoing role to play in this transition. If we are to meet emission targets, large portions of the grid's conventional power generation will need to be replaced. This explains the persistent growth in all forms of renewable energy generation with policy and, more recently, economics driving adoption.
Policy direction is easy to see with the US Environmental Protection Agency pushing forward with its Clean Power Plan or India's announcement to install 100 gigawatts of solar power by 2022.
More interesting though is that the unsubsidised economics of renewable energy has reached that tipping point where adoption has become a simple question of "do you want cheaper electricity or not?".
Wind power has undercut natural gas-fired power generation for some years now, which has been a major driver of growth. More recently, it was solar's turn. A recent report from Deutsche Bank indicates that it is now economic to install unsubsidised solar on your rooftop in 39 countries, including Australia, France, Germany, Japan, Mexico, Spain, Turkey, China, India and certain US states. What this means is renewable energy adoption is accelerating as policy and economics push renewables to the fore. This is an exciting time for renewable energy as growth appears unrestrained for the foreseeable future.
Australian Ethical invests in renewable energy across its funds, but you will find the highest concentration of renewable investments in its award-winning International Shares Fund, which has a 'smart energy' thematic. For the 12 months ending July 2015, the Fund has returned 22.5%, after fees. Over the past three years, it has achieved a compound annual growth rate of 27.4%, after fees.