How impact bonds are fuelling the renewable energy transition
As the world races to combat climate change, one thing is clear - we need a massive transition to renewable energy.
Energy is at the heart of the climate crisis, and the facts speak for themselves. Fossil fuels—coal, oil, and gas—are the largest contributors to global climate change, responsible for over 75% of greenhouse gas emissions and nearly 90% of carbon dioxide emissions (United Nations Climate Action, 2024).
The good news is that renewable energy sources are available in every country and we're yet to fully tap into their potential. According to Dr Rod Carr, Chair of the New Zealand Climate Commission, 15 billion tonnes of carbon dioxide was added to the atmosphere through the burning of coal last year, 80% of which was emitted through electricity generation, despite the technology being available to prevent this. “We don’t need to invent a single new thing to stop burning coal to make electricity. This is a failure of funding and distribution, not a failure of technology” he said.
The International Renewable Energy Agency (IRENA) estimates that by 2050, 90% of the world’s electricity can and should come from renewable sources. In an urgent call to action at the G20 Foreign Ministers' meeting in September, United Nations Secretary-General António Guterres called on G20 nations to lead the charge in cutting fossil fuel production and tripling renewable energy capacity by 2030.
He urged the phasing out of coal, and the need for equitable and fair transition to clean energy for all nations, regardless of economic status. To avoid the worst impacts of climate change and achieve net-zero emissions by 2050, global emissions must be halved by 2030.
These targets are ambitious, but they are essential for keeping global warming within safe limits. While policy changes play an important role, they won’t be enough to drive the changes needed. It will take a significant investment in the technologies and infrastructure needed to power the future.
This is where impact bonds can help.
Why we invest in impact bonds
Impact bonds include green bonds, social bonds and sustainable bonds. They are an investment designed to raise funds for projects that provide social and environmental benefits. These bonds are a type of fixed-income investment issued by governments, companies, and financial institutions to finance projects that contribute directly to a more sustainable future while offering returns to investors.
We invest in these bonds through the Affirmative Global Impact Bond Fund. We see impact bonds, especially green bonds, as an effective way of fuelling the renewable energy transition.
What sets green bonds apart is that their proceeds are exclusively used to fund projects promoting climate action and environmental sustainability, aligning perfectly with our commitment to a healthier planet. They allow us to directly fund global projects like solar farms, wind energy and sustainable infrastructure in countries that need it the most, while also contributing to the United Nations Sustainable Development Goals.
Through Aurora, your KiwiSaver investment is making real-world impact
Here’s a snapshot of how our members' KiwiSaver money has driven positive impact for the climate and environment through the Affirmative Global Impact Bond Fund in 2023.
By channelling capital into renewables, green bonds not only help reduce carbon emissions but also offer investors a return comparable to standard bonds. The real bonus is they actively support the fight against climate change.
Here are some of the amazing projects supported by the fund.
Connecting New Zealand's renewable energy to the grid
Transpower New Zealand - Green Bond
Transpower, New Zealand's state-owned grid operator, plays a crucial role in building and managing transmission infrastructure while ensuring the country’s electricity supply meets demand. It’s key to New Zealand’s energy transition, constructing new connections to renewable plants and expanding grid capacity. In 2023, their green bonds enabled 265MW of renewable energy capacity to be connected to the grid, capable of supplying around 331,000 New Zealand homes each year2.
Expanding onshore wind-energy capacity in Brazil
Statkraft – Green Bond
Norwegian company Statkraft is Europe’s largest renewable electricity generator. Proceeds from their green bonds have been used to finance the Ventos de Santa Eugênia Project in Brazil. This is Statkraft’s largest wind project in South America and will include 14 wind farms in the state of Bahia, contributing an additional 519MW of renewable electricity capacity and delivering 2.3TWh of wind power per year – enough to supply 1.2m Brazilian homes.
Combined solar and BESS in South Australia
Vena Energy – Green Bond
Proceeds from Vena Energy’s green bond programme have been used to build out renewable energy capacity across Asia and Australia. This includes the Tailem Bend 2, a combined solar and battery energy storage system (BESS) in South Australia. The project, with 159MW capacity (118MW of solar and 41MW of battery storage), will power 35,000 homes annually and reduce greenhouse gas emissions by over 207,000 tonnes of CO2e.
Source: Affirmative Global Impact Bond Fund, 2024 Impact Report
2 Based on an average annual household consumption of 7,000kWh.
Last updated 16 October 2024
DISCLAIMER
This information is provided in a general nature only and should not be construed as or relied on as financial advice. This is not a recommendation to invest in a particular financial product or class of financial products. You should seek financial advice specific to your circumstances from a Financial Adviser before making any investment decisions.
Past performance is not a reliable indicator of future performance. The value of your investment may go up and down.