How investing in energy and climate made a difference in 2018

The energy and climate challenge
Climate change is a fact of life. Flooded villages in Bangladesh and India, as well as in the US and Europe, extreme drought in the Sahel in Africa, Argentina and Australia in 2018 are examples of its severe environmental consequences. If we do not counter global warming, the environmental and social damage will be enormous.

The social-economic importance of energy can hardly be exaggerated. Access to modern energy technology makes the difference between poverty and prosperity. If we do not address social and economic issues, we will not be able to solve the climate change problem. Yet, all social and economic development will be futile, if we do not address this major challenge.

This holistic view forms the base of Triodos Investment Management’s investment strategy for energy and climate.

Decarbonisation

Our fossil fuel-based energy system is the largest cause of global warming through the emission of CO₂. It therefore plays a key role in any approach to successfully countering climate change. To keep the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C - the goal of the Paris Climate Agreement - a radical, global transformation to a low-carbon or even zero-emission economy is required.

Access to energy

In its World Energy Outlook 2018, the International Energy Agency states that more than one billion people worldwide have no or limited access to electricity, and that close to three billion people use wood, charcoal and biomass as their primary energy source. This impedes economic development, has a negative impact on health and contributes to deforestation and climate change.

The Outlook also projects global demand for primary energy to grow by more than 25%, requiring more than USD 2 trillion per year of investment in new energy supply. The highest power demand growth between 2012-2030 is expected to come from developing and non-OECD countries.

Our investment goals
We strive for an energy transition that goes hand in hand with a sustainable and inclusive society. Our goal is a radical transformation of our energy system. As well as replacing fossil-based energy generation with renewable energy, this requires a huge improvement in energy efficiency. It is equally important that we aim to improve the availability of and accessibility to clean and affordable energy, especially in emerging countries.

For our investments this translates into four specific impact goals:

1. Improve energy efficiency

both on the supply and on the demand side. On the supply side by investing in improvement and modernisation of production and transportation. On the demand side by investing in energy-saving solutions. Our contribution to this goal is measured in the amount of avoided CO₂ emissions.

2. Increase generation and improve access

by offering affordable renewable energy, to replace energy based on fossil fuels. Our contribution to this goal is measured in the amount of renewable energy generated, its equivalent in the number of households that could be provided with clean power, and the amount of avoided CO₂ emissions.

3. Improve flexibility and reliability

by investing in different solutions and techniques that keep the energy system stable and robust. Also turning intermittent sources of renewable energy into a reliable alternative for the fossil fuel-based system. Solutions include storage, electric vehicles and smart grids. Our contribution cannot yet be expressed in a figure, but is illustrated in the case studies about wind park Hartelkanaal and Lower Solu Hydropower.

4. Energy democracy

to stimulate further de-centralisation of the energy system by strengthening local ownership of energy generation, and improving public awareness, support and involvement in the energy transition along the way. Our contribution cannot be expressed in a figure, but is illustrated in the case study about wind cooperative Deltawind.

Developed countries

In developed countries, we focus on the transformation of an existing energy system into a more differentiated system.

Whereas fossil fuel power is generated in a centralised power system, renewable power, by its nature, can also be generated in decentralised systems. Wind and solar power, for example, can be small in scale and feed into local/regional distribution grids.

In addition, the Paris Agreement target cannot be reached without reducing energy demand by improving energy efficiency. In 2018, our investment focus also turned in this direction, as our investment in Muniled shows.

Developing countries

Globally, more than one billion people lack sufficient access to energy, and millions suffer from frequent power outages, mainly in developing countries.

Lack of access to modern energy technology limits income generation, blunts efforts to escape poverty, affects the health of women and children, and contributes to deforestation and climate change.

Many developing countries have a limited centralised grid, available only in urban areas. We therefore focus on increasing grid-connected generation capacity to meet the rapid growth in demand. We also aim to increase access to affordable energy by investing in off-grid solutions especially in more rural areas.

The impact data below refer to two of our impact goals - improve energy efficiency and increase generation and improve access.

453,534 tonnes of CO₂ emissions avoided

247,743 number of households provided with clean electricity

441 MW capacity

800,594 MWh produced

Impact measurement
In reporting our impact as a sustainable asset manager, we include all the impact of the projects and clients that we finance. In technical jargon this is called the contribution approach.

We used the contribution approach to report the greenhouse gas emissions of our renewable energy portfolio up to 2017. This was previously both practical and, we believe, reasonable. Since 2018, we also include the attribution approach in our carbon disclosures. This means that we calculate the avoided emissions based on the proportion of our finance in a project.

It’s important to note that an attribution approach leads to lower carbon emissions figures than a contribution approach. That is because a contribution approach accounts for all of the emissions from a project rather than a proportion of them. The attribution approach is a more accurate reflection of our responsibility for the greenhouse gas emissions of the projects we finance and is consistent with the PCAF methodology. For a detailed explanation, please read the Triodos Bank Greenhouse Gas accounting methodology.

Triodos public voice
In addition to their role as impact investors, Triodos Bank and Triodos IM also actively contribute to public debate about a sustainable and inclusive energy transition.

Being an acknowledged expert in financing renewable energy projects, Triodos Bank played an active role in the realisation of the Dutch Climate Agreement, chairing the sector platform Electricity and participating in the sector platform Built Environment (chairing the subgroup Financing and Standardisation). Furthermore, our Director Energy & Climate participated in the task force Financing of the financial sector (banks, pension funds, insurance companies and asset managers), discussing the financing of the different parts of the Agreement and contributing to committing the financial sector to the targets of the Paris Climate Agreement and the Dutch Climate Agreement.

Find out in more detail how each of our funds – Triodos Groenfonds and Triodos Renewables Europe Fund – contribute to the energy transition.

See where our investments make a difference. Click on each to find out more.

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Accelerating the energy transition

Why do we invest in the energy transition?

What are our goals regarding the energy transition?

How do we invest for impact in Energy and Climate?

Impact highlights

CO₂ emissions avoided

Households provided with clean electricity

Generation capacity

Production

The impact of our funds

Triodos Renewables Europe Fund

Accelerating the energy transition

Triodos Groenfonds

The greenest way to invest

Impact on a global scale

Frontier Energy II Fund: broadening the investment scope

Lower Solu: Hydropower in Nepal

Deltawind - Private, cooperative ownership

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