The volatility caused by COVID-19 has caused many investors to reconsider their portfolios and search for a more balanced mix of investments. One asset class that has come under the spotlight is renewable energy. Traditionally seen as a niche investment, renewable energy assets are increasingly becoming mainstream. And it’s easy to see why.
Within a portfolio with a long-term time horizon, an allocation of renewable energy equity can provide investors with a regular income, protection against volatility, diversification benefits and an opportunity to positively contribute to the environment.
In this article, we take a look at three reasons why investors may find solar assets an attractive investment opportunity in the current environment.
Renewable assets are intended to perform in a stable and predictable manner.
Solar assets are designed and constructed for a 30-year life so, once established, there is minimal ongoing operation and maintenance requirements. The fuel source for a solar asset, the sun, is not subject to market volatility and there are well established datasets for making bankable resource forecasts. And, most importantly, renewable energy returns are not impacted by broad economic events in the same way as equities, corporate bonds or real estate are since, by their nature, they provide essential services which are not easily sacrificed in economic downturns.
This all makes renewable energy equity an attractive investment for consistent, stable cash flows.
2. Diversification benefits
More than ever, a resilient diversification strategy is a crucial part of an investment portfolio. An allocation of lower beta renewable infrastructure, particularly during the current period of volatility, can help to protect your capital while still generating a regular income.
Portfolio diversification can prove beneficial in negative market events such as the Global Financial Crisis, when the Australian all ordinaries price index fell by 44% from November 2007 to December 2008, or during the recent COVID-19 downturn when it fell 38% within four weeks between February 2020 and March 2020. 1During this time, there was little impact on renewable energy equity returns with demand for electricity staying stable and high-grade offtake contracts locking in the electricity prices.
COVID-19 has reshaped the investment market for years to come. Other income generating asset classes, such as bonds, are projected to have weak yields and commercial office vacancy rates in Sydney and Melbourne are expected to reach 15%, with forecast rents falling as much as 40% and office values dropping by 30% over the coming years.2
Incorporating an allocation of renewable energy equity, as part of a holistic portfolio, can provide diversification benefits, deliver regular and stable income, and enhance overall portfolio outcomes.
3. Contribute to the environment and local communities
Sustainable investing has come a long way. Once considered a niche and a way for investors to align their portfolios with their personal values, today, the reality is that investor interests, investment performance, and environment, social and governance (“ESG”) issues are tightly linked.
ESG steers the values of the Solarion Renewable Fund (“Fund”). Through the Fund, Solarion is giving investors the opportunity to use their capital to bring about change – to individuals, communities, businesses, the environment, and even the way energy is generated.
Solarion’s vision is to accelerate the transition towards renewable energy in the AsiaPacific region, while delivering meaningful environmental benefits and making a difference to people and their local communities. To do this, we’re re-shaping the way energy is generated. No longer burdened by having to build large renewable projects covering hundreds of acres of prime land, there is an opportunity to create value through bespoke medium-scale solar assets that generate strong returns while helping local regions.
All of the medium-scale solar projects that are available through the Solarion Renewable Fund must meet Solarion’s core investment criteria ensuring no sensitive land or native vegetation is impacted, local people and businesses are prioritised for work opportunities, and materials are recycled where possible. It’s a small change but combined it makes a big difference for people and for the environment.
Solarion are trying to create a better future and the Fund is its way of offering investors the ability to make a change by combining an investment for a financial return with a positive contribution to the environment and society.
Renewable energy assets are resilient to the impacts caused by COVID-19 and offers a range of benefits to enhance investment portfolios. An investment in this asset class brings stable, consistent yields, diversification benefits to protect against volatility, and the opportunity to positively impact the environment and local communities.
The Solarion Renewable Fund is now making this asset class available to wholesale investors by offering an opportunity to invest via the Fund into their chosen medium scale solar asset and receive attractive, regular returns with a low correlation to economic conditions.
Investing for a sustainable future
Solarion is a renewable energy investment manager specifically focused on mediumscale solar assets that deliver sustainable, attractive returns. Our vision is to accelerate the transition towards renewable energy in the Asia-Pacific region, while delivering meaningful environmental benefits and making a difference to people and their local communities.
Solarion recommends that you read through the Information Memorandum once it has been made available by the Trustee of the Fund (especially Section 11 entitled “Risks”) to allow you to make an informed decision before investing in the Fund.
This article has been prepared by Solarion Investment Pty Ltd as a corporate authorised representative (No. 001284401) of D H Flinders Pty Ltd (AFSL 353001). Solarion Investment Pty Ltd is the investment manager (“Investment Manager” or “Solarion”) of the Solarion Investment Fund (“Fund”), an unregistered managed investment scheme. The Investment Manager’s authority under its Corporate Authorised Representative Agreement with D H Flinders Pty Ltd is limited to general advice regarding the Fund only. Any other advice provided is not provided pursuant to this agreement. Vasco Custodians Pty Ltd (“Trustee”) is the trustee of the Fund.
This article contains information about the potential issue of interests in the Fund to investors that are wholesale clients as defined in s761G of the Corporations Act 2001 (Cth). It is not intended to be used by any other persons in any other jurisdiction if and to the extent that to do so would be in breach of Australian laws, or the laws of any foreign jurisdiction.
This article contains general information only and is not intended to provide any person with financial advice. It does not take into account any person's (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making an investment in the Fund. Neither the Investment Manager, D H Flinders Pty Ltd nor Trustee make any representation as to the accuracy, completeness, relevance or suitability of the information, conclusions, recommendations or opinions contained in this report (including, but not limited to any forecasts made). No liability is accepted by any of these entities or their respective directors, officers, employees, agents or advisors for any such information, conclusions, recommendations or opinions to the fullest extent possible under applicable laws.
This article may contain forward looking statements regarding our intent, belief or current expectations with respect to market conditions. Readers are cautioned not to place undue reliance on these forward-looking statements. The Investment Manager does not undertake any obligation to revise any forward-looking statements to reflect events and circumstances after the date of this publication.
Neither the Investment Manager, D H Flinders Pty Ltd nor Trustee guarantee the repayment of capital, the performance of any investment or the rate of return for the Fund. Past performance is not necessarily indicative of future performance.
This document is not an Information Memorandum for the purposes of the Act. Accordingly, it does not purport to contain all information that potential investors may need to make an informed assessment as to whether or not to invest in the Fund.
Some numerical figures in this publication have been subject to rounding adjustments.