Sources of Investment

Clean energy funds had a strong year in 2013, with an asset-weighted average gain of 17.1% compared with the 1.5% increase in 2012. The best performer saw its share price more than double, due to its concentration in solar stocks. Much of the capital raising of 2013 involved project-oriented funds and took place in Europe.

North America saw the emergence of innovative yield-oriented financing vehicles, which pass a high share of earnings to shareholders and provide stable, long-term cash flows. Two "yield companies"i came to the market, raising a total of USD 631 million in 2013 for solar, wind, and hydropower projects.

Crowd funding continued to become a more mainstream means of raising money in an increasing number of countries. Crowd funding enables small companies and start-ups to raise capital from many small investors in exchange for an equity stake, structured payments, and/or products.

Clean energy project bonds set a new record in 2013, with over USD 3.2 billion raised through 10 confirmed transactions; solar power projects dominated the top 10 bonds by size, accounting for just under ha If of the total. A consortium of banks, representing eight of the top 10 corporate bond underwriters, released its "Green Bond Principles" in January 2014, establishing voluntary guidelines on what constitutes a green bond, the potential types of bond, the issuance process, and the need for companies to detail their plans for the proceeds.4

Institutional investors, including pension funds, insurance companies, and wealth managers, continued to play an increasing role, particularly in Europe. A record volume of investment was seen, thanks to the appeal of project yields that are double those of government bonds, combined with a high level of predictability. However, the total volume of institutional finance deployed on projects remained small compared to the overall institutional asset allocation, due to political, regulatory, and other hurdles.

Development banks were again an important source of clean energy investment in 2013.ii Germany's KfW—the largest lender for clean energy projects in 2012—reduced its renewable energy commitments by 41% to USD 6.5 billioniii (EUR 4.7 billion). By contrast, the European Investment Bank (EIB) raised its lending to renewables by 98%, to USD 8.8 billion (EUR 6.4 billion), to set a record high. Also in 2013, several development banks—including the World Bank, EIB, and European Bank for Reconstruction and Development—curtailed their funding for coal-fired power, pledging to support it only if no other fuel is viable. Theywerejoined by the overseas aid departments of the United States and several northern European countries.iv

4 For more information, see "Green Bond Principles 2014: Voluntary Process Guidelines for Issuing Green Bonds,"