Climate

You Can Now Invest In Solar Bonds Through Your Retirement Account

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Investing in solar energy through a retirement account just got easier, thanks to a new initiative.

Major solar provider SolarCity announced Monday that it was partnering with securities and investment firm Incapital to allow Americans to invest in Solar Bonds through their IRAs or financial advisers.

Solar Bonds, which were created by SolarCity in 2014, are a way for Americans to invest in solar through a bond structure, rather than buying stock in a company. Bonds are similar to a loan made to a company which is paid back to the investor, with interest, over time, and are typically considered less risky than stocks. Before SolarCity’s new partnership, people interested in purchasing Solar Bonds had to go through SolarCity; now, they can do it through through the financial company that manages their retirement account. The bonds start at $1,000 and have maturities of up to 15 years and annual interest as high as 5.45 percent.

Tim Newell, Vice President of Financial Products at SolarCity, told ThinkProgress that the effort to make solar bonds more easily available to customers is timely, because Americans are growing more and more interested in socially-responsible, sustainable investments. According to a report last year from the Forum for Sustainable and Responsible Investment, investments in what the report calls “sustainable, responsible and impact investing assets” have grown 76 percent since 2012, topping off at $6.57 trillion.

“Impact investments and socially responsible investments have been around for a long time, but I think now people’s expectations have changed,” Newell said. “People are learning that…you can earn good economic returns and do good with your money at the same time.”

The calls for major companies, organizations, cities, and universities to divest their holdings of fossil fuel stock may play also a role in this increased interest in sustainable investments. Environmental group 350.org, which has championed the divestment cause, has a section of its Fossil Free USA website devoted to individual investors, and with stories being published on a regular basis about universities and cities divesting from fossil fuels, some individual investors may be prompted to do the same.

Clem Dinsmore, a financial adviser at Oppenheimer & Co. in Washington, D.C., works with a fair number of “green clients” who are interested in investing their money in environmentally-friendly companies and causes. He told ThinkProgress that he’s had multiple clients who don’t have the ability to install solar on their homes (for lack of roof space, adequate sun, or other reasons) say that they’d like to facilitate the installation of solar on someone else’s home. A solar bond — as long as it’s “adequately secure from the credit point of view,” could be a good way of doing that, Dinsmore said.

Dinsmore also said that he thinks younger generations are often more likely to be drawn to sustainable investing on a broader level, while older generations, who have been investing for far longer, may be more skeptical about changing their investments.

“If I talk with people about climate change, and they’re 40 and under, it’s not hard for me to establish their interest in sustainable investing,” he said. “They know they and their children aren’t going to survive if there’s not a greater adoption of sustainable investing.”

Investing in funds that include companies with firm environmental, social and corporate governance policies isn’t inherently more risky, Dinsmore said. Depending on the composition of the funds, these investments have the potential to promise returns similar to those of a conventional fund — one that might include major oil or gas companies.

With SolarCity’s new partnership, Solar Bonds are now available through more than 500 financial institutions in the U.S. But when it comes to offering more socially-responsible, sustainable funds on a broader level, Dinsmore thinks that most major money managers view these funds as a niche market, and don’t think their customers are interested enough in them to offer a variety of choices for funds with good environmental, social and corporate policies.

However, as more people, universities, companies and cities begin investing in these socially and environmentally-responsible funds, Dinsmore thinks that will change. The California Public Employees’ Retirement System announced last year that it would be divesting its funds of fossil fuel companies. If research finds later on that, after the fund was divested, it still performed as well as a conventional fund, money managers and investors will start to catch on.