Triodos Groenfonds is 25. How did you celebrate this milestone?
Willy Bulsink: "The year 2023 is certainly a momentous one for the oldest green fund in the Netherlands, but we celebrated the anniversary quietly. Because although we look back with immense pride at all that the fund has accomplished, we also know that the mission is far from over, given all the global challenges to keep within the sustainable limits of our planet. We raised our coffee mugs, had a piece of cake and then started looking for the next sustainable project."
Is Triodos Groenfonds the oldest green fund in the Netherlands, or is it just following the latest trend?
"Triodos Groenfonds is definitely the oldest green fund in the Netherlands. It is not a trend follower, but rather a trendsetter. The fund has always been a driver of sustainable transitions. For example, it helped to finance the first solar and wind energy projects in the Netherlands, long before the big banks started to lend money. Meanwhile, we are looking at new segments, such as battery storage, heat grids and hydrogen."
As long as it's green?
"We mainly finance projects that have been designated as green by the Dutch government, i.e. fall within the Green Projects Scheme. These are projects designed to accelerate the energy transition and also contribute to a better and more sustainable food system or promote a circular economy. This includes projects that lead to more sustainable use of natural resources and soil. The disposable economy must give way to the circular economy. The current economic model is based on resource extraction, production, consumption and disposal. This leads to resource scarcity, as well as to a lot of waste and pollution. Hence the search for solutions to extend the life of products and reuse materials."
Is there much involved in running Triodos Groenfonds?
"You could say that! The investment strategy, impact reporting, marketing, administration, and implementing the regulations are all part of my role. But my primary responsibility is to carefully invest the money investors have entrusted to us, where return and impact go hand in hand."
Is Willy Bulsink a person on a mission?
"Definitely! We humans face some enormous challenges. We are now encountering the planet's sustainability limits and exceeding them is getting harder to fix. Challenges include climate change, the depletion of natural resources and the loss of biodiversity. And many people still don't have access to affordable, clean energy and healthy food. My work allows me to contribute to a fairer, greener and more social society. I truly believe in the transformative power of money."
Is Triodos Groenfonds a unique fund in the Dutch investment landscape?
"Nowadays, there are lots of sustainable investment funds for investors to choose from, but Triodos Groenfonds is really different. Most funds go no further than promoting environmental standards by excluding sectors and companies that create negative impacts from their portfolio. These are the light green funds covered by Article 8 of the SFDR. But impact funds, such as Triodos Groenfonds, go much further. Besides excluding investments that have a negative impact, impact funds first and foremost seek out investments that are proven to make a positive contribution to a more sustainable society. These dark green funds fall under Article 9, and they are thin on the ground. Another special feature of Triodos Groenfonds is that investors can potentially look forward to a tax benefit."
How has Triodos Green Fund developed over the past 25 years? What has 25 years of investment policy and fund capital accomplished?
"As a green investment pioneer, the fund operates as a niche player in markets that are constantly changing. As a result, the focus has changed over time. In the beginning, we financed many solar and wind energy projects. Now the fund operates more in innovative segments such as battery storage, food transition, bio-based building and the circular economy. We currently have 250 projects in the portfolio with a total value of around 850 million euros."
How do you determine the projects that the fund invests in?
"The investment policy is based on the energy, food and resource transition pillars. When selecting projects, I draw on our sector teams. These teams have the necessary know-how and networks in the sectors relevant to Triodos Groenfonds. Funding only becomes available when all the signals are green. This is an intensive exercise. We have in-depth discussions with businesses and undertake a thorough due diligence process. Yes, the work is very inspiring."
What are some of the exciting projects Triodos Groenfonds currently invests in?
"In North Holland, we finance a greenhouse complex with integrated solar panels on the roof. As land is a scarce resource, this kills two birds with one stone. The project combines sustainable energy generation and food production.
For the resource transition, we have made funds available for buildings largely composed of natural materials. Thanks to the circular design, a large part of the building can be reused. In addition, these buildings are often energy neutral or generate extra energy themselves.
As part of the food transition, we finance a biodynamic city farm in Almere. With arable land for farming and grassland for cows between the new buildings, it also has a community role with a farm shop and a daycare."
Does Triodos Groenfonds also invest in other countries, or is it limited to Dutch projects?
"We can finance up to 20% of the portfolio internationally. Currently, 10% of the portfolio consists primarily of impactful energy projects in emerging countries. We have invested money in a mini-grid in rural Madagascar for 45,000 households to have access to clean and reliable energy through solar panels and battery storage."
Which type of investor is Triodos Groenfonds the right investment for?
"The fund targets Dutch private investors who want to contribute to making our society more sustainable with their money and have a term horizon of at least three to five years. In addition, this investor believes that making a positive impact is just as important as achieving a healthy financial return. That's also how we select the investment projects."
Investors in the fund can claim a tax benefit. That's a nice added extra.
"The Dutch government offers tax benefits for those who save or invest in green projects. Triodos Groenfonds is one of the few funds that is eligible for this. The maximum tax benefit is currently 2.6%. The benefit comprises a 0.7% tax credit in Box 1 and an additional exemption in Box 3, which can amount to 1.9%."
Twenty-five years ago, sustainable investing was a pioneering venture. Now, it is almost commonplace. Is that reflected in the popularity of Triodos Groenfonds?
"Sustainable investing has seen a huge rise in recent years, but 2022 marked a trend shift. High inflation, sharply rising interest rates and challenging conditions in the financial markets have led to large withdrawals of capital from funds. Triodos Groenfonds has also experienced this. It's a great shame.
Projects may also not meet expectations. What about the fund's risk profile?
"All financing must be repaid. That is why we do thorough due diligence beforehand. And we cover risks as much as possible, for example by securing collateral. Last year was a difficult year globally due to negative macroeconomic events. But our portfolio remained healthy. We saw no significant change in the number of companies running into repayment problems. This is very telling. However, there has been a value correction of the loan portfolio due to sharply rising interest rates. These are mainly accounting, unrealised losses. With each loan repayment, another piece of depreciation is recouped."
Groenfonds is an impact fund. Investments must contribute substantially to a better world. How big is this impact?
"It is substantial. In 2022, the projects in the portfolio avoided emissions of 300 tonnes of CO2, supplied 300,000 households with green electricity, and financed over 10,000 hectares of organic farmland, accounting for seven million organic meals."
Returns must also be achieved. What have investors been able to expect over the past 25 years? And, more importantly, what does the future hold?
"Since the start of the fund, the average return has been 1.55% per year, excluding the tax benefit. It’s hard to comment on future returns. However, we always try to achieve a premium over government bonds. Triodos Groenfonds operates no differently from traditional investments, so the greater the risk, the higher the premium."
This is a translation of an article published on IEXProfs on 13 September 2023.