When you talk about investment, you often think about investing in stocks and bonds of a private company. Have you ever thought that you can invest in renewable energy companies? You do not invest in stocks of renewable energy companies. Instead, you spend on a project. Investment in renewable energy is on the rise.

People who can invest in lands and buildings can also invest in solar and wind. However, the investment decision must be appropriate. For instance, investing in solar panels makes a sense because the demand for them has gone up lately. Further, solar and wind plants are fulfilling the needs of significant power users.

Environment issues have become a global subject of worries, and now the government and large companies with corporate social responsibility are taking efforts to promote green energy. Since green energy can have a far-reaching impact on the environment, several investors are looking forward to investing in these projects. Renewable energy projects are more transparent than other investments like shares and bonds because you know exactly where you are investing money. Here is how you can invest in renewable energy companies.

Direct investment

If you are looking out for less risky renewable energy investment, you should consider investing money directly to energy projects. You can choose a small amount to invest in them to mitigate the risk. Solar projects are likely to be more successful than any other projects when it comes to the installation of a plant. You can earn a significant amount of return.

Green bonds

Another right way to invest money in renewable energy in the UK is buying green bonds. They work as an ordinary bond of a listed company. However, these bonds let you earn a better return. When you buy bonds of such companies, your money is invested in green projects. They are not very risky; therefore, it can be a good option if you want to test the water.

Green bonds are a standard method of inviting investors to invest in green projects indirectly because it demonstrates that the company is committed toward sustainable development. It generally attracts the attention of those investors who invest in renewable energy projects due to one reason or the other.

These sustainable projects include but not limited to solar, wind, water management, clean transportation, climate change adaptation, sustainable waste management, energy efficiency, and biodiversity conservation.

Green mutual funds

Green mutual funds are a type of investment that generally includes companies that exclusively invest your money in environment-friendly projects. As mutual stock funds allow you to diversify your investments in shares and bonds of different companies, green mutual funds include a wide variety of investment projects like solar, wind, green transport, waste management, and water management. Green mutual funds are also as safe as green bonds.

Green stocks

Some renewable energy companies are listed. You can buy their stocks. You can also choose to invest in exchange-traded funds. They yield higher return compared to green bonds and green mutual funds, but they are riskier too.

However, they are better than individual green stocks. Exchange-traded funds involve dozens of different stocks. Since you will have an opportunity to invest in stocks of different companies, you will have diversified stocks across renewable energy projects, and hence it can minimise the risk. However, make sure that all of those investments move independently.

Since exchange-traded funds allow you to have diversification across all investments, you will be more exposed to significant renewable energy companies than small and medium-sized companies. If you are sceptical about investing in individual green stocks, you can prefer exchange-traded funds.

Green start-ups

If you have a stable financial condition and you are bold enough to invest in the riskiest investment, you can choose green start-ups. However, before investing in start-ups, make sure that you know the growth plan of such companies, and you are confident that they have the right way to take it a step ahead.

What is the risk of investing in renewable energy?

Renewable energy investments are safe and secure, but it does not mean that they are not subject to risk. One of the most significant risks associated with renewable energy is development risk.

These projects are long term, and sometimes they take more than the expected time due to political and geographical intervention. However, sometimes it is because of an extensive project and complications it involves to get completed. If you do not have the patience to wait for a long time to get the return, you are not an ideal investor for this. Renewable energy investments are a safe way to earn a significant amount of return but do not forget that it is a long-term investment project, which means you will have to wait for a long time to start getting the return.