Portfolio diversification is a tactic that is generally recommended for investors under any market conditions. This is even more true under the erratic Trump Presidency.
Since Donald Trump was elected investors have been jittery. While stocks spiked after he took office on January 23rd, levels of economic uncertainty are still at an all time high. Individual presidential tweets, for example this one targeting Toyota, have cost companies billions off their share value.
Increasingly, investors are looking for strategies to shield their portfolios from market downsides and provide steady returns in times of uncertainty.
One commonly cited reason our investors give for adding Green Bonds to their portfolio is diversification.
They like what they see as the product’s lack of correlation to public market volatility.
How Green Bonds can shield you from market downsides
CoPower Green Bonds pay fixed returns of 5% annually on a five year term or 3.5% annually on a three year term. Our bonds are backed by diversified portfolios of senior, secured loans to operational clean energy and energy efficiency projects across Canada.
Because returns come from the sale of clean power or from energy savings generated by those clean energy projects--and not market movements--they’re great for reducing volatility in your portfolio.
When Trump tweets and markets yo-yo, your Green Bonds are all good.
Take, for example, the over $6 million in project financing CoPower investors have provided to three portfolios of LED lighting retrofits in condo buildings across Ontario, BC and Alberta.
CoPower Green Bond financing enables the LED firms we partner with to offer $0-money down lighting retrofits allowing more condos to take advantage of the incredible energy savings LEDs provide.
Following the installation, the condo corporations pay for the energy efficiency services over time in installments that are less than the savings on their energy bill, meaning that they’re impact and cash flow positive from day one. Those payments are then used to re-pay the loan to CoPower and generate the steady returns that flow through to bondholders.
We all need to pick up the slack left by Trump
President Trump’s decision to exit the Paris Climate Accord places a greater burden on the rest of us to step up and make the clean transition a reality.
In addition to protection from market downsides there’s an ethical argument for increased investment in green bonds and other investment products that support the development of clean energy and climate solutions.
The good news is that we can profit while doing so! By investing in green bonds a growing movement of investors is using the power of their portfolios to address the financing gap, build more clean energy, while making an attractive financial return in the process.