Qualified Opportunity Zone funds present investors with an innovative and potentially attractive new way to participate in the powerful growth occurring in the renewable energy sector—but you’d never know it from reading many mainstream news outlets.

The New York Times, the Wall Street Journal and other publications around the country have published high-profile stories over the past 12 months, questioning the efficacy of the Opportunity Zone program—which was introduced as part of the Tax Cuts and Jobs Act in 2017—in guiding impactful investment toward housing and other development in economically challenged communities where it is desperately needed. In particular, a great deal of media attention has been focused on luxury property developments that would have been constructed even without the Opportunity Zone legislation.

The idea that Opportunity Zones are being used improperly by rich real estate developers has become so prominent that casual investors might be forgiven for thinking that Opportunity Zones, and the funds built on investments within them, are exclusively vehicles for real estate investing.

The legislation does point to Opportunity Zone “properties” as one eligible type of investment. However, the law also provides the same benefits for Opportunity Zone “businesses”—and that’s where new options for investors seeking attractive entry points to the renewable energy market enter the picture.

Opportunity Zone funds that focus on solar and wind energy businesses have the potential to yield comparable returns to real estate-focused funds. When constructed properly, they also carry potentially lower risk than real estate development investments in low-income areas.

Beyond the potentially attractive returns, renewable energy businesses developed within Opportunity Zones can drive powerful positive differences for the communities the legislation was intended to help. Low-income communities tend to be hardest hit by environmental degradation such as air and water pollution, and they often struggle economically due to the lack of well-paying jobs. Renewable energy businesses have the potential to make a positive impact on both fronts, by creating jobs in the construction and ongoing operation of facilities, and by addressing the environmental problems that plague low-income communities.

As the renewable energy sector continues to grow, advisors and investors owe it to themselves to re-examine the benefits of “green” Opportunity Zone funds, which give ecologically-minded investors a chance to align their investments with their green values—while helping struggling communities at the same time.

Renewable Energy: An Under-Appreciated Secular Growth Trend
Worldwide demand for renewable energy is increasing, presenting long-term growth opportunities for investors, even without the tax advantages of the Opportunity Zone legislation.

Overall demand for power will increase by 62% by 2050, according to Bloomberg New Energy Outlook 2019, resulting in a near tripling of generating capacity. Bloomberg New Energy also expects output from solar to make up 22% of global electricity generation by 2050, up from 2% today, with wind sources accounting for 26%, versus just 5% today.

On the supply side, the total costs of both solar and wind generation have fallen precipitously over the last few decades, putting the economics of those sources at parity with natural gas. The trend stands to continue as manufacturing technologies improve and global competition heats up between equipment makers.

First « 1 2 » Next