Accelerating the energy transition

How investing in energy and climate made a difference in 2019

Why do we invest in the energy transition?

The energy and climate challenge

Climate change is a fact of life. The warmer climate already affects natural and human systems around the world, leading to more temperature extremes, rising sea levels, more heavy rainfall and more frequent and intense droughts. In turn, these effects result in desertification, land degradation, scarcity of clean water, loss of biodiversity, acidification of oceans, declining food security, more inequality – to name but a few. It is widely acknowledged that 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 foundation of Triodos Investment Management’s investment strategy for energy and climate. Read our vision paper Towards a low carbon economy (PDF) to learn more about our position on renewable energy and climate change.

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. Most countries in the world have pledged to some form of energy transition away from fossil fuels. Throughout the world, the share of renewable energy is growing. At the same time, however, worldwide carbon emissions may flatten, according to the International Energy Agency in its report on 2019 carbon emissions. Yet they remain at levels far above the level required to keep the global average temperature rise to well below 2°C above pre-industrial levels and preferably limited to 1.5°C, as stated in the 2015 Paris Climate Agreement.

In its World Energy Outlook 2019 (WEO), the International Energy Agency states that close to 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 WEO also projects global demand for primary energy to grow by 1.3%, annually to 2040 if the world continues on its current course. The highest power demand growth between 2012-2030 is expected to come from developing and non-OECD countries, especially in Africa.

Even though renewable energy covers a substantial part of this growth, the WEO concludes that “the momentum behind clean energy technologies is not enough to offset the effects of an expanding global economy and growing population.”

At the same time, according to the WEO, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing, which is “cause for deep concern.”

What are our goals regarding the energy transition?

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:

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.

by offering affordable renewable energy, to replace 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.

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 be expressed in a figure, but is illustrated in the case study about wind park Hartelkanaal.

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.

How do we invest for impact in Energy and Climate?

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 Climate Agreement target cannot be reached without reducing energy demand by improving energy efficiency.

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.

Impact highlights

The numbers show the impact of our goals to improve energy efficiency and increase generation and improve access.

400,000 tonnes of CO₂ emissions avoided

CO₂ emissions avoided

The clean energy generated by the projects we (co)financed, resulted in 3,300,000 tonnes of avoided CO₂ emissions. Based on our share in these projects, avoided CO₂ emissions amounted to 400,000 tonnes.

250,000 households provided with clean energy

Households provided with clean energy

The projects we (co)financed, generated enough clean energy to cover the annual demand of 3,821,000 households. Based on our share in these projects, this number amounts to 250,000 households.

475 MW capacity

Generation capacity

The total generation capacity of the projects in portfolio is 2,000 MW. Based on the share we financed, the capacity amounts to 475MW.

760,000 MWh produced

Production

The total production realised by the projects in portfolio in 2019 is 5,638,000 MWh. Based on the share we financed, production in 2019 amounted to 760,000 MWh.

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.

The impact of our funds

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

Impact on a global scale

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

In stories: interviews and case studies

Understand more about how our energy and climate investments spur sustainable development and contribute to achieving many of the Sustainable Development Goals.

Do you want to invest for impact?

Contact our investor relations team to find out more about our impact investment opportunities

Looking for more information?

Find out more about our impact investment funds in energy and climate to make your money work for positive change.