"For us as impact investors, social and environmental returns are as important as financial returns. There should be pluses for all three aspects,” says Triodos Groenfonds Fund Manager Willy Bulsink. This takes place in a holistic way, adds Energy and Climate Team Manager Harold Hofenk: “An investment is not sustainable if you only reduce CO2 emissions and then create lots of different problems in other areas. Then the big picture doesn't add up.” Triodos Groenfonds is managed by Triodos IM and has about 900 million euros under management. Bulsink wants to contribute more to accelerating the energy transition in the coming years by investing in heat transition, energy storage and green hydrogen.
Achievable and affordable
It's important to us that the energy transition remains achievable and affordable for everyone, Bulsink stresses. “We look at the high energy prices with mixed feelings. For sustainable projects, it's a good situation. Project credit risks are decreasing. But at the same time, everyone must be able to afford heat and energy. For us, a country that has reduced CO2 emissions to zero, yet displays a huge divide in society is not a good living environment.” Although the government has done much to offset high energy prices, the pressure on households remains high. It's not only the EU Green Deal that has increased the need for sustainability, but geopolitical conditions have also contributed. “We have long been calling for an energy transition, but until recently it felt like we were the only ones. This has now turned around completely. At birthday parties, the talk is all about clean energy and how important it is to become less dependent on countries like Russia. The political agenda has clearly changed in recent years. This helps with the acceleration.”
“Renewable energy projects should be developed in collaboration with the surrounding area as much as possible,' Hofenk observes. We often finance projects involving an energy cooperative, so that part of the return can flow back to the local area. Preferably in a way that everyone can benefit from, not just the people who have invested capital in the cooperative.” Triodos mainly finances initiatives which (partly) use the returns to improve the sustainability of the wider neighbourhood, for example by including the homes of people who do not have the money to pay for the sustainability measures themselves. “We see that these types of projects meet less resistance, because the area benefits in many ways.”
"We consider feasibility and scalability when funding new technologies. Just as Triodos Bank was the first Dutch bank to finance wind turbines in 1987, Triodos Groenfonds was one of the first Dutch investment funds to finance large-scale battery storage in 2019", says Bulsink. “From a market perspective, it has always been very important for Triodos to be a pioneer in the energy transition. We are continually looking at what our added value is in the market. We are now less actively involved in large-scale solar and wind projects. There are plenty of other investors for that nowadays. We do still finance smaller and medium-sized projects.” Triodos is very specifically looking for new, innovative segments that offer a lot of prospects for the future, such as battery storage. “Because our Energy team is so immersed in the subject matter, we can assess projects quickly and thoroughly, which often gives us a head start and allows us to respond quickly to new developments.”
Predictable business case
"These are proven techniques", Hofenk emphasises. "We look for a predictable business case so that the financing can always be repaid from profits. It must be a successful innovation that has yet to see large-scale market development. We make an assessment of what could happen in the worst-case scenario. How much profit can the project make, and how much of it is available for loan repayment? That means that when the market is uncertain, we finance a little less and build in more security.” As an example, he cites storage batteries that can handle grid congestion. “The return in the next few years of these kinds of projects is fairly predictable. We will then assume the most conservative estimate for all our financing. When assessing, we look at whether projects can handle the interest charges, or whether more equity is needed in the project. Our aim is to be a catalyst, in the hope that other parties will eventually take up the baton.”
This interview was published in Dutch) earlier on TopicNL.