Community Impact Investing in Sustainable Infrastructure

Above: Food Farms and Solar Farms coexisting in Vermont.

With so many investment options geared towards ESG strategies, it can be hard to identify ones that drive direct and measurable impact towards their desired cause. The investments that can trace their value to an actual effect are said to have “additionality.” For example, buying the stock of the even the best-intentioned company that is already publicly listed does not create additionality, but investing with a firm that builds new distributed scale sustainable infrastructure projects does. Each dollar is directed into building a real asset, which creates jobs, injects money into local communities, and produces quantifiable ecological impacts that positively impact all socioeconomic strata.

Renewable forms of energy have accounted for over 50 percent of newly installed capacity for the last five years in the US, and this is projected to accelerate in the coming years as renewables become the dominant source of energy by 2035. The opportunities for environmental and community impact are tremendous. In early iterations of the recently passed 2021 Infrastructure Bill, proponents included provisions for human infrastructure. It was a novel way to bridge two conceptually disparate ideas: people and the built environment. Yet, in every possible way, infrastructure and people are deeply intertwined. Renewables, and more so distributed scale renewables, represent one of the best ways to positively impact a community.

Imagine a distributed scale solar project planned on 5 – 20 acres of land in a rural community (as opposed to a utility scale project in the desert planned on 20 square miles). The project doesn’t just appear. It takes years and literally hundreds of people, stakeholders, champions, and stewards to bring it into being. Throughout the process, salaries are paid, environmental impacts are weighed, and communities plan how to spend their increased revenue in the form of taxes. The workers who build the project are local, they spend a portion of their wages with business in the community where the project is located, and the money supply increases. Nearly 230,000 people work in the solar energy industry, with over 160,000 in development and installation. In addition to jobs, the landowners generally retain their land, and collect rent from the project. In some cases, that means being able to affordably convert to an organic farm, or the additional rent serves as a hedge against the volatile price of milk.

What’s more, a sense of community is tangibly forged around these state-of-the-art technology projects, which are entirely compatible with rural and urban living alike. Community members can purchase the clean power directly from the projects often at a discount to their power bill, all while doing their part to slow down climate change. Farmers can graze their sheep between the rows of panels while also creating value from their unused land. These projects democratize renewable power, as everyone, regardless of creditworthiness, can buy power and save money from these “community solar” projects. It’s not just individuals that can participate; the clean power is available to municipalities, hospitals, and commercial entities alike. Schools can save enough money by buying clean, renewable energy to retain or hire new faculty and staff – even in the face of budget cuts.

Each project also creates a tangible CO₂ offsets by replacing power used from traditional fossil fuel power plants. When possible, these projects are built on shuttered industrial sites, capped landfills, and other derelict plots of land giving them a new purpose.

When evaluating an investment opportunity like this, it is prudent to consider the values of the managers and the company’s track record. The “Greening of Wall Street” has moved mountains of capital into the impact space, but it hasn’t always changed the hearts of the investment professionals themselves. These projects are complex, and not all investment managers play the game with the same altruistic dogma. There is an additive way and an extractive way to get these projects across the line. Savvy impact investors take care to scrutinize the manager and platforms they back. Wealth managers, their clients, and individual investors would gain far more satisfaction knowing that their investments are with proper stewards who are driven by a greater purpose.

The best part is that these projects work economically. A reliable policy that sets a stable framework around permitting, interconnection, and taxation is more sustainable than handouts and giveaways. With solar currently at around 3 percent of the electric mix in the US and projected to exceed 15 percent in ten years, it represents one of the largest and fastest moving transition markets of our lifetimes. Properly managed, distributed scale assets are one of the most significant ways to create impact in a local community while rebuilding the environment.

Infrastructure has a great story to offer when considering community impact. Dollars are invested directly into tangible benefits to communities, people, and the environment – creating pure additionality.

 

Article by John Chaimanis, Co-Founder and Managing Director of Kendall Sustainable Infrastructure. His work focuses on all aspects of the business including setting the strategic direction, deal sourcing, financial structuring and asset management. Prior to Kendall, Mr. Chaimanis worked with a subsidiary of Edison International in California where he developed and acquired over $500M of energy projects, installing 250MW of renewable energy assets. Mr. Chaimanis is published and has lectured to universities on the topic of energy markets and renewables. Prior to his career in energy, Mr. Chaimanis co-founded a charter school. Mr. Chaimanis holds an M.B.A. from Babson College, and a B.S. in Finance from Villanova University. He has earned certification from US SIF for Sustainable and Responsible Investing (SRI). Connect with him on LinkedIn at – https://www.linkedin.com/in/johnchaimanis/