Investing in clean energy
David ten Kroode
In 2013, Oikocredit amended its investment guidelines to incorporate environmental criteria. In mid-2014 Oikocredit welcomed renewable energy financing expert, David ten Kroode, who will build-up and manage the renewable energy portfolio in conjunction with our regional offices. With a set strategy and a few deals now done, we spoke with David about how and where he will build-up the portfolio and why the renewable energy sector is a good fit for Oikocredit.
Why is renewable energy an important sector for Oikocredit to diversify into?
“Around 80% of Oikocredit’s current portfolio is invested in microfinance institutions (MFI). By diversifying our development portfolio with investments in renewable energy (RE), we will mitigate our risk while at the same time meeting our social, environmental and financial commitments.”
What are Oikocredit’s growth targets for this portfolio?
“It is our goal to have over € 90 million of approved projects by the end of 2016, out of which € 50 million should be disbursed. The reason being is that actual disbursement of capital can be a real challenge. Compared to the MFI sector, RE investments take much more time to disburse because the construction of a solar, wind or hydropower facility can take up to several years to complete.”
How will you source deals and what will you look for?
“ For us, the most important source of opportunities is our network of regional and country offices across 35 countries. Our staff in the regions are best positioned to keep track of RE activities on a local level and explore RE finance opportunities. In addition, we have a multitude of other ways source deals, including RE conferences to develop partnerships with like-minded investors.”
Is there a particular region you’ll be focussing on first?
“The focus for now is on Latin America. This is mainly due to a combination of heavy activity in the RE market (wind, solar and small hydropower) as well as Oikocredit having the capacity in the region to source and develop RE financing opportunities. Latin America is also where we have closed our first RE deal for a hydropower plant in Peru. Our next steps will be looking at on and off-grid solar and bio-mass in other regions.”
Is there a particular subsector, for example solar power, that will have priority? If so, why?
“In general, we will stick to technologies that have been tried and tested. Therefore our portfolio will consist most likely of solar, wind, hydropower and some biomass projects. Newer technologies, such as fuel from algae or electricity from tidal currents, however promising, will not be in our portfolio for now. My personal RE favourite is solar, or photovoltaic (PV) solar to be more exact. Solar does not have some of the environmental or social impact concerns that other technologies do have. For example, wind turbines are very large and can disturb bird migration patterns and hydropower plants in a river can impact water supply for farmers living downstream. Plus, solar is very safe, requires very little maintenance and can be scaled from very small (think a $5 solar charged lantern) to very large solar arrays costing tens of millions of dollars.”
Oikocredit is a cooperative. Are its member organizations keen on Oikocredit diversifying into renewable energy?
“The primary driver for RE is to fight climate change by reducing harmful emissions caused by fossil fuel generated electricity. Add to that the social benefits of providing jobs, better power infrastructure to low-income communities and better access to electricity. These social as well as environmental impacts make RE a sector that is very much in line with our mission as well as our people, planet, profit approach – the triple bottom line.”