By: Tyler Hamilton
Investing directly in green energy projects just became a whole lot easier for Canadians looking to shift their savings away from fossil fuels.
CoPower, a start-up co-headquartered in Toronto and Montreal, has just launched a retail “green bond” that raises money for specific pools of solar, geothermal and energy-efficiency projects.
The five-year bond, the first of its kind to be available across Canada, offers a 5 per cent annual return, compared to less than 2 per cent for GICs and Canada Savings Bonds.
David Berliner, co-founder and chief executive of CoPower, said the company developed the product to fill a gap in the emerging marketplace for impact investing, a form of socially responsible investing that is not generally accessible to the average Canadian.
In essence, CoPower aims to democratize impact investing through a form of crowdfunding, the potential of which was, until recently, limited in Ontario by securities regulations.
“A lot of people have been trying to do investments that align with their values, increasingly in the green energy space, but they’ve found it hard,” said Berliner, 28, who founded the company two years ago to expand access to the market beyond sophisticated or accredited investors.
At this point, individuals looking to purchase the bonds have to do so in $5,000 increments, which might not be for everyone. The bonds can, however, be held in self-directed RRSP, tax-free savings and other registered accounts.
One of CoPower’s core innovations is an online platform — at copower.me — that walks investors through the registration process and assures all investments comply with securities regulations. An online dashboard allows for tracking of investments and the projects they’re tied to, creating a level of transparency that people find reassuring, Berliner said.
“Technology is definitely an enabler here. From the get-go, the vision has been to have an online platform that lets us reach a broader base of different investors,” he said.
Michelle Brownlee, director of policy at Ottawa-based think tank Sustainable Prosperity, said CoPower’s retail green bond appears to be unique in Canada. There are local community green bonds, such as those offered by ZooShare or SolarShare, but both are limited at this point to Ontario and are focused on specific technologies.
She said that by harnessing the collective power of individual investors, CoPower could become an important source of capital for many clean energy projects, which are expected to grow substantially over the coming years as Canada works to meet its Paris climate commitments.
“Green bonds are moving very quickly from niche to mainstream,” said Brownlee, adding that CoPower’s approach “could potentially be very big.”
About $66 billion (U.S.) in green bonds have been issued globally, of which $1.3 billion are Canadian, according to a December report from Sustainable Prosperity. The bonds have been targeted at and readily scooped up by institutional buyers, with Export Development Canada, the Ontario government, and Toronto-Dominion Bank among the biggest issuers so far.
The Trudeau government has said it will establish a Canada Infrastructure Bank that would also introduce green bonds, mostly to institutional investors but also the public “when appropriate.”
At the retail level, “there’s a huge pent-up demand for this kind of product,” said Tom Rand, a manager partner with ArcTern Ventures, a venture capital fund in Toronto that focuses on clean energy technologies.
“The financial community is really conservative, so it has taken an entrepreneur like David to come in from the outside and shake things up. It’s brilliant.”
If CoPower can pull it off, said Rand, others will more likely follow. “This will go far in educating the public.”
To keep the investment risk low, CoPower’s first bond is backed by two loans to clean power projects that are already built, operational and delivering returns — two large rooftop solar projects in southwestern Ontario and energy-saving building automation and LED lighting systems installed at Toronto’s Harbourfront Centre.
Over the time, CoPower will build its portfolio of projects and launch new rounds of green bonds along the way. Money raised will support loans to smaller clean-energy projects being built by a network of experienced energy development partners. They’re the kind of projects big banks tend to avoid.
“It’s an underserved market,” said Berliner, whose past work includes consulting for the mayor of New York City’s renewable energy office and coordinating sustainability initiatives at the University of Toronto.
CoPower got a major boost in October when RBC led an $850,000 round of financing in the company. Having RBC as an equity owner, Berliner said, “helps bring credibility to our team, business model and brand.”