Retail investors can, for example, invest in actively-managed mutual funds from Genus Fossil Free, or renewable energy infrastructure debt from B.C.’s SolShare Energy; Alberta’s Alberta Solar Co-op; Ontario’s OREC and SUN Co-operative; and Nova Scotia’s Scotian WindFields, Watts Wind Energy and Wind4All.

However, the average solar or wind bond isn’t available to non-residents and the public cleantech sector isn’t large or settled enough to support many retail mutual funds or passive funds that reflect market fundamentals.

Most cleantech action in Canada is reserved for accredited and institutional investors who can access alternative investments outside of stocks and bonds. These investments usually consist of portfolios of entrepreneurial companies managed by private equity firms (including venture capital) such as Chrysalix, DBL Cleantech Capital, Efficiency Capital, Emerald Technology Ventures, EnerTech Capital, Evok Innovations, Pangaea Ventures, Pyfera Capital and Yaletown Partners.

To dig deeper into this space we reached out to a sample of nine additional Canadian cleantech investors: two in debt, four in private equity and three in public equity.

CoPower

CoPower’s green bonds provide project financing for cleantech infrastructure developers in North America. The company’s mission is “to unlock capital for climate solutions by empowering individuals to participate in – and profit from – the low carbon transition.” With low investment minimums, and an online dashboard providing personalized financial and environmental performance information, CoPower is accessible and millennial-friendly.

Trish Nixon, director of investments, explained to Corporate Knights how CoPower makes impact through two kinds of distributed power: “As a financial partner and innovator, we will help accelerate the growth of the distributed clean energy market in North America,” she said. “By democratizing clean energy and impact investing, we can help individuals align their investments with their values, and in doing so cast their vote for clean capitalism.”

Interested investors can access the green bonds directly through CoPower or through participating investment advisors. Bondholders earn up to five per cent annual interest, distributed quarterly over a five-year term.

SolarShare

SolarShare is the largest renewable energy co-operative in Canada and one of the foremost clean investment opportunities available to retail investors in Ontario. Like CoPower, SolarShare supports distributed power by building infrastructure that produces electricity where it is consumed, and by allowing wide access to its solar bonds via low minimum investments (they are available to all Ontario residents starting at $1,000).

Jennifer Bryan, the co-operative’s community investment and marketing manager, describes SolarShare as “growing by leaps and bounds and has just surpassed $22 million in bond sales from 1,275 investors.” Bryan notes that local communities such as those in northern and remote Ontario, where large-scale solar projects are currently being built, benefit from local revenue and job creation. By 2017, SolarShare projects will be generating enough power for 1,600 homes.

SolarShare bondholders earn five per cent fixed-interest on five-year bonds (which are RRSP/TFSA eligible) and six per cent fixed-interest on 15-year self-amortizing bonds, well above the current rate of government savings bonds.

InvestEco

In food and agriculture, the booming organic food sector is expanding from Whole Foods to Walmart. According to the Organic Trade Association’s most recent study on U.S. consumer attitudes about organics, the coveted millennial demographic is now “devouring” organics.

Financing part of this food revolution is InvestEco. Similar to how millennials prefer their food grown, InvestEco’s focus developed organically: Founded in 2002, it originally invested in a portfolio of companies that included renewable energy and efficient transportation. After developing deep expertise and a broad network in the food and agriculture sector, InvestEco now almost exclusively invests in that growth sector.

Managing partner Alex Chamberlain told CK that InvestEco invests in “high-growth private companies that have a strategic advantage in the market by virtue of their brand, distribution channels, unique supply chains, farming protocols, processing capabilities, or proprietary technologies.” InvestEco targets top-quartile financial returns, while producing social and environmental benefits that are measured, monitored and reported.

JCM Power

JCM Power is a renewable energy company which develops, constructs and operates renewable energy infrastructure that fits criteria intended to limit risk to activities under JCM’s control. The focus is on African and Latin American countries that lack electricity yet have plenty of sun and wind. The projects look to bring electricity to millions of people, reduce greenhouse gases and replace unhealthy fuels such as smoky kerosene and diesel.

“The economics of solar have improved so dramatically over the last couple of years that we don’t need subsidies,” says CEO and cofounder Christian Wray. “The main challenge is working with governments with little experience in solar to create strong bankable contracts that meet the standards of international financiers.”

JCM’s private investments rely on power purchase agreements (PPAs) between itself, an independent power producer and seller, and buyers of electricity such as governments. The contracts are fixed on hard currencies, backed by development finance institutions, and last as long as 25 years. PPAs represent a secure stream of future cash that JCM plans to transform into a return higher than the common private equity target of 20 per cent.

ArcTern Ventures

Speaking with Tom Rand, managing partner at ArcTern Ventures, the purpose of his early-stage investments was clear: “Let’s beat fossil fuels.” Located at MaRS, hub of Canadian cleantech activity, it appears Rand is in a good position to lead the way.

ArcTern is exposed to smart technologies that increase efficiency like smart thermostats, but has no plans to shy away from the “real cleantech” that will replace carbon. These replacements, including game-changers in renewable energy, materials and energy storage, are all represented in ArcTern’s portfolio.

Asked whether a likely change in climate priorities south of the border challenged his investment strategy, Rand replied, “The market does not change for me month-to-month or year-to-year; this is a multi-decade problem that isn’t going away, and neither will the market returns.”

Rand, author of Kick the Fossil Fuel Habit and Waking the Frog, expects to make significantly above market returns by investing in entrepreneurs who don’t need subsidies but do promise outsized growth through technological innovation.

Renewal Funds

Renewal Funds was created to accelerate the shift of resources to a regenerative economy. “We invest capital on behalf of people who care deeply about environmental and social issues facing our planet today,” says CEO Paul Richardson. “Our mission is to invest in purpose-driven companies whose products and services address climate change, the integrity of our food systems and the health of our oceans.”

Renewal Funds has invested in 22 early-stage companies innovating in the sectors of organics and environmental technology. Its portfolios are designed to deliver above market returns while catalyzing positive change and encouraging sustainable, multi-generational thinking.

The fund was founded in 2008 by Richardson, Joel Solomon and Carol Newell. Since that time, Renewal’s investor base has grown to nearly 200 mission-aligned individuals and charitable foundations as well as select financial institutions and its assets under management have grown to over $100 million.

AGF Global Sustainable Growth Equity Fund

The AGF Global Sustainable Growth Equity Fund provides capital to companies that offer energy, water, waste and environmental health and safety solutions. Companies that fit into these sustainability themes are mapped by value chain and across market capitalization, resulting in a portfolio significantly different from its conventional benchmark, MSCI World.

Martin Grosskopf, VP at AGF Investments and portfolio manager of the fund, described in an email the fund’s footprinting: “We use Trucost data to assist with this and are the only fund in Canada to publicly disclose this data.” Grosskopf expects each portfolio company to strive to continuously improve on material environmental, social and governance issues.

Since moving 45 per cent of the portfolio from Canadian to higher-growth global equities in 2014 the fund has performed well against MSCI World and has outperformed the thematic MSCI Global Environment Index since the index’s inception in 2008.

NEI Environmental Leaders Fund

Canadian mutual fund company NEI offers retail products managed by expert external portfolio managers such as Impax Asset Management. Launched in 2016, NEI Environmental Leaders Fund invests in U.S. and world public equities that optimize resources by producing renewable energy, building sustainable water infrastructure and recovering resources from hazardous waste, among other projects.

David Richardson is managing director at Impax, which manages the fund. Asked about any likely impact from a change in U.S. energy policy, Richardson noted that possible negative effects on pollution control companies would likely be outweighed by a tax cut beneficial to small and midcap companies well represented in the portfolio. “Regardless,” he said, “the fund is 40 per cent invested in water infrastructure and water efficiency demand has no place to go but up.” The fund’s target is to financially outperform its benchmark, MSCI World, by two per cent.

“Considerable research is put into measuring the fund’s environmental impact, from the amount of water treated to the amount of materials recycled,” notes Richardson. Even the amount of carbon offset by renewable energy is calculated and reported by EY, a leading environmental assurance provider.

Greenchip Financial

For John Cook, president of Greenchip, the strategy to invest in the “great energy transition” is not based on a hunch. According to Cook, “The transition from fossil energy to renewables, from inefficient processes to efficient ones, is unstoppable.” Since starting a decade ago, Greenchip’s investment thesis has held the hallmarks of an elegant mathematical proof: growing population-driven consumption and pollution mixed with decreasing natural capital results in growing opportunity for companies whose products and services address these challenges.

The Greenchip Global Equity Fund manages almost $35 million on behalf of a hundred accredited investors. The fund has outperformed the MSCI World benchmark since inception. Greenchip invests from a universe of about 800 environmental leaders operating around the world.

Cook is certain that efficiency and renewable power are the path to profitability, especially as GDP growth begins to decouple from CO2 emissions. “Investors that ignore these trends are taking on needless risks and missing an historic investment opportunity,” he warns.

The post Canadian investor profiles appeared first on Corporate Knights.

McLuhan founded a school of thought, media ecology, which seeks to understand culture through technological change. He foresaw the birth of the internet and the decline of print, projecting that increased connectivity would usher in social responsibility that we see today in millennial investors. From the media ecology point of view, millennials do not approach investing differently because of the content they were raised on; their different approach reflects the uniquely global, integrated and collaborative techno-environment in which they were raised.

Growing interest in impact

Research showing millennial alignment with responsible investing is of no small importance: in 2015 Morgan Stanley noted that over the coming decades $30 trillion will be inherited by North American millennials who are itching to transform the world; a year later the financial services giant released research indicating wealthy American millennials “in particular are enthusiastic about [sustainable, responsible and impact investing] by wide margins.”

Canada is witnessing the same trend. Royal Bank of Canada recently published a study showing, among wealthy investors, millennials had the most appetite for impact investing, defined as the investment strategy that intentionally seeks to create measurable environmental and social benefits beyond financial return. An Ipsos-Reid poll in April found two-thirds of millennials weighed environmental, social and governance factors when investing compared to just 40 per cent of baby boomers.

Young investors who are less well-off are also part of this resilient trend. Assaf Weisz, managing director of Purpose Capital, a North American impact investment and advisory firm, provides evidence from a Toronto community bond issuance that millennials of modest means are interested in impact investing when minimum investment amounts are within reach. To him, “millennial support for responsible investing is not hype, but rather a coherent expression of their values.”

Make change 2.0

In a certain light, the worldview of millennials is a reboot of the worldview of the beatniks McLuhan taught back in the ’60s. According to Weisz, the new paradigm “still seeks to address big inequities, but by working from the inside of the system instead of protesting against it. A ’60s protester is today’s social entrepreneur.” Unlike the hippies, digital natives have been interconnected since birth; they are at home with Web 2.0, the form of the internet that allows change makers to collaborate.

For Ryan Coelho, a millennial consultant for the private sector, technology is disrupting the very meaning of work. When workweeks were planned to the minute and weekends rarely heard the boss calling the home landline, work-life balance was a simple equation. Coelho suggests that as flextime and remote working replace fixed work schedules, and as mobile devices and social media transform workers into full-time brand ambassadors, “the concepts of work and life are becoming increasingly integrated.”

Coelho adds, “It doesn’t make sense for millennials to pursue profit during the week and purpose during the weekend.” The same logic holds for investing, says Weisz. “The dichotomy of private wealth versus charity has given way to a complex, multivariate form of systems thinking. Millennials want to know how the whole is impacted by its parts.”

The market is beginning to use language that better resonates with the largest generation of North Americans. Goldman Sachs offers impact investment products that produce “innovative commercial solutions that address social and civic challenges.” RBC has the Generator Fund, “a pool of capital [that invests] in for-profit businesses tackling social or environmental challenges.” David Borcsok, the manager of the fund and a self-described optimistic millennial, believes that “companies that combine impact and profit are the types of companies that really speak to millennials. There doesn’t have to be a trade-off between impact and financial return: It’s a competitive advantage.”

Universal owners of the Global Village

If you define responsibility as the ownership of consequences, the connection between digital natives and responsible investing is clear. Digital natives were born into a “Global Village,” a term McLuhan used to describe the global awareness made possible through advanced communications technology. Through the same technology, long-term institutional investors have become globally diversified. These “universal owners” have stakes in the entire market, however small a slice.

To take this a bit further, an investor who invests only in the handicraft of a single villager will only care about the profit produced by that villager, not the harm; a second investor who invests in the handicraft of all villagers will also want to know who is poisoning the well. The second investor is the universal owner, and the poison in the well is a negative externality that can devastate the entire market.

A report by UN PRI and UNEP FI urges universal owners such as large pension funds to “reduce externalities and minimize their overall exposure to these costs” on the market. Weisz considers the millennial mindset to run in parallel with universal ownership. “The relevant economic context for prior generations was national,” he notes, “now it’s global. Prior generations couldn’t see the negative social and environmental impacts of their investments – negative externalities were invisible.”

There are no invisible externalities in the Global Village. Millennials have seen a global financial contagion made possible through integrated banking, self-radicalized extremists through a viral online presence and an Ebola epidemic through international travel. In a world without borders it’s little wonder millennials want to see all investing consequences – including social and environmental – to be tallied together in an integrated report.

Born to do the right thing

Research from MIT Sloan Management Review and Boston Consulting Group suggests companies that outperform on sustainability issues material to their industrial sector also tend to financially outperform. Environmental, social and governance metrics are going mainstream, even entering debt capital markets. The market for harm reduction is growing.

Although they lead the carbon divestment movement, screening out polluters isn’t enough for millennials. It has never been easier for them to start up their own social enterprise to tackle challenges. Reflecting true millennial aspiration, Google’s “Don’t be evil” motto was upgraded to “Do the right thing.” Perhaps this shift isn’t surprising given that millennials will take a pay cut for a purposeful job, or accept lower returns to invest in purposeful companies. Call it blended value or shared value: they believe this approach will pay off.

Unlike previous generations, when millennials first researched the term “investment,” what they read was likely surrounded by little hypertext “[edit]” buttons.

The message in those little brackets is that when it comes to investing, millennials – skeptical of finance and born to make a difference – are looking to make some big changes.

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