Impax tends to favor global companies because they don’t face systemic risk if a utility or policy initiative slows development in a particular market. It shies away from new technologies—because it’s difficult to build a diversified portfolio with them—and prefers to invest in “proven technology that’s just riding the long-term growth curve of renewable project development,” he says.

Despite its enthusiasm for renewable energy, Impax limits its exposure to the sector because of its volatility. “It’s not because of the long-term growth themes,” says Richardson, “but just because investors don’t understand it very well and sentiment and mood can change pretty quickly.”

As of March 31, renewable and alternative energy constituted 6.6% of the assets in the Pax World Global Environmental Markets Fund, which Impax subadvises. Another 33.1% was allocated to energy efficiency. In late 2014, the fund (traded under the symbol “PGINX”) added positions in China-based Huaneng Renewables Corp. and Trina Solar Ltd. and in Italy-based Enel Green Power S.p.A.

Major Shifts
Ron Pernick, founder and managing director of Clean Edge, a 15-year-old Portland, Ore.-based research and advisory firm devoted to the clean-tech sector, has observed three major recent shifts regarding investing in renewable energy.

Corporate and institutional investors have begun to get more active here over the past three to five years, he says, and there has been a shift from equity investments in technology companies to debt finance for projects.

For example, Google has agreed to fund more than $2 billion in renewable energy projects and uses renewable energy to power 35% of its operations. Bank of America Merrill Lynch has teamed with SolarCity, the U.S.’s largest solar provider, to finance $600 million in residential and commercial solar projects.

The third shift in renewables, he says, is the debut over the past two years of more investment vehicles for retail investors. A dozen or so exchange-traded funds now focus on clean tech and renewable energy, including the seasoned Guggenheim Solar ETF, PowerShares WilderHill Clean Energy Portfolio and First Trust Nasdaq Clean Edge Green Energy Index Fund, which is based on the Nasdaq Clean Edge Green Energy Index (CELS).

Though still barred from master limited partnership structures, renewable energy assets are now permitted in REITs. Yieldcos are also becoming a popular financing mechanism, particularly for solar. Energy providers are establishing them in order to bundle operating assets that generate predictable cash flows. Yieldcos, traded on the major stock exchanges, offer yields in the 5% to 7% range, says Pernick.

The CELS index has five yieldcos, including Pattern Energy Group (PEGI), an independent power company that operates wind power facilities in the U.S., Canada and Chile. Hannon Armstrong Sustainable Infrastructure Capital (HASI), a REIT in the index, provides debt and equity financing to the energy efficiency and renewable energy markets.

Additional fixed-income inve stments in renewable energy are also emerging, he notes. In October, SolarCity launched the U.S.’s first registered public offering of solar bonds.