Almaty, a metropolis in the far south of Kazakhstan: skyscrapers against a backdrop of glaciers and snow-capped mountains over 4,000 metres high. Altynai Valikhanova, Head of Project Debt at Triodos IM, is from there. She recently visited Almaty again in a professional capacity. Because even in Kazakhstan, largely dependent on coal for its energy supply, Triodos IM is looking for opportunities to invest in renewable energy. And the debate is ongoing about the pace of the energy transition in Kazakhstan too. "Then I point up to the glaciers," says Valikhanova, "we are proud of them in Almaty. And my question is always: do you want to keep this skyline?"


"Of course that's what people want. So, then it's about how we can all make that happen. We want to contribute to this by funding renewable energy projects."

How did Triodos IM approach this?

"We already have plenty of renewable energy experience. For decades we have invested in wind and solar energy through Triodos Groenfonds, primarily in the Netherlands and through Triodos Energy Transition Europe Fund across Europe. In 2013, we decided to explore whether our accumulated knowledge and expertise in this field would also be applicable in emerging economies. Combined with in-depth knowledge of these local markets, it quickly became apparent that this was undoubtedly the case.

Investing in emerging economies is not new to us - with our Financial Inclusion strategy, we have been active in these regions since 1994, and with Triodos Groenfonds since 2014. And in 2021, we finally set up a fund specifically for this theme, Triodos Emerging Markets Renewable Energy Fund. By 2022, the first full calendar year of the fund, it has led to investments in 10 projects in seven countries, for more than USD 36 million."

Altynai Valikhanova

What kind of projects are involved?

"It's very diverse! It's hard to put them all under one heading. Triodos Emerging Markets Renewable Energy Fund and Triodos Groenfonds, for instance, are providing USD 8.5 million each to Vietnam's largest wind power project. This amounts to a total of USD 173 million. But the funds also finance a financial institution in Kyrgyzstan that issues loans for making homes more sustainable, such as insulation and the purchase of solar-powered fridges. This amounts to USD 2.5 million. We are also active in the Dominican Republic. And we're exploring opportunities in Chile, a country where the energy supply is already 40% renewable."

How does Triodos IM decide which projects to finance? Surely the risks can be quite high in emerging markets.

"That's true. What matters to us is the impact of the projects, and in that respect Triodos Emerging Markets Renewable Energy Fund has been very successful. By 2022, these investments contributed to the creation of nearly 3,200 MW of renewable capacity and avoided 29,000 tonnes of CO₂ emissions. Furthermore, we look at the social impact: 27,000 households now have access to clean energy thanks in part to the fund, and the projects have created over 11,000 new jobs.”

"On the other hand, clearly we cannot take irresponsible risks. It's just a fact that there are plenty of good ideas out there. Everyone has good ideas for renewable energy projects. But not everyone has the experience needed to turn those ideas into successful projects. Therefore, we only work with well-established project developers, proven names in their countries, organisations with a solid track record. That's our first requirement. We can only meet that requirement if we have enough knowledge about a country or region, if we have a local network there, and if we have the professionals working there who know exactly how things operate.”

"A second condition is that, in principle, we never provide financing on our own. In addition to a significant contribution from the developer to finance the project up to the 'ready to build' phase, we always seek collaboration with like-minded parties such as other impact investors or development banks or multilateral institutions such as the Asian Development Bank. We do joint due diligence and make similar assessments. By doing this we can spread our risk.”

“The important thing is the quality of the project itself. What does cash flow look like? What are the underlying purchasing contracts? Are the prices fixed or variable? How is the project insured? What are the environmental and social risks? We analyse every aspect, and we take technical and legal guidance from local advisers where necessary."

Does this mean all risks are covered?

"No, that's an illusion. There is still no such thing as 'risk-free' investing. We then model the whole deal and run multiple scenarios. What happens if interest rates go up? What happens if the local currency takes a hit? If these calculations lead to acceptable outcomes, both in terms of impact and returns, then we'll go for it."

So not every project makes it?

"Definitely not. We are constantly going through dozens of options, researching and gathering the required information. This can take months. Or longer. We once spent a year and a half working on a project that was then cancelled. As I said, it's not a given that a good idea will lead to a good project. You also need local knowledge to make a project 'bankable'. That knowledge may not always be available, and this is where we can sometimes help. But this takes time. Patience is a virtue! We would all love to do this very quickly, but practice shows that it is better to never lose sight of due diligence.”

“And finally, in many emerging markets, renewable energy is still not 'business as usual'. It's important for us to set an example, to demonstrate that renewable energy is a sensible and financially sound solution and can compete with fossil alternatives. If, as Triodos IM, we can demonstrate the success of this strategy with our projects, others will follow us. And I mean local parties in particular. That's important because only with the involvement of local developers and local capital markets will we be able to achieve the volumes needed for the energy transition in emerging countries."  

This is a translation of an article in Investment Officer, 3 July 2023.