Divesting from fossil fuels isn’t just about ethics. It’s about smart financial strategy. Fossil fuel investments are increasingly risky, while clean energy is on the rise. This creates both a moral and financial imperative for change. In this post, we’ll explore why divesting from fossil fuels is a crucial move and how shifting your investments into solar energy can benefit you.

The Financial and Ethical Case for Divestment

Traditional energy sources like oil, coal, and gas are becoming less profitable. Market volatility, regulatory pressures, and the rapid adoption of renewable alternatives are diminishing their returns. In contrast, renewable energy investments are experiencing substantial growth and can offer more stable and attractive returns.

The share of renewables in electricity generation is expected to rise from 30% in 2023 to 37% in 2026, largely supported by the expansion of ever-cheaper solar energy. This growth is set to displace global coal-fired generation, which is forecasted to fall by an average of 1.7% annually through 2026.

Fossil fuels are the largest contributors to global climate change. They account for over 75% of global greenhouse gas emissions and nearly 90% of all carbon dioxide emissions. Continuing to invest in this sector also counteracts efforts to limit global warming as outlined in the Paris Agreement.

Divesting from fossil fuels sends a clear message that investors prioritize the health of the planet and future generations over short-term gains. As awareness of climate change’s impacts grows, many are recognizing the ethical imperative to move away from fossil fuels and redirect funds toward sustainable sectors like renewable energy.

The Divestment Trend

More than 1,500 institutions with over $40 trillion in assets have committed to divesting from fossil fuels. For good reason. In 2023, sustainable funds outperformed their traditional peers, with a median return of 12.6% compared to 8.6% for traditional funds. It is important to note, though, that overperformance in one year does not necessarily mean this is a trend.

As more investors pivot to sustainability, fossil fuel companies face increasing difficulty securing capital. This trend further accelerates the industry’s decline and promotes the growth of renewable energy sectors.

How Divestment Helps Combat Climate Change

Divestment from fossil fuels redirects capital toward renewable energy sources. This shift supports the growth of clean energy infrastructure, which is essential for reducing global carbon emissions. By pulling investments from high-carbon industries and reallocating them to renewable energy, investors play a direct role in the energy transition.

Major institutions and countries are leveraging divestment to accelerate this shift. For example, Norway’s $1.3 trillion sovereign wealth fund, one of the largest in the world, divested from companies heavily reliant on fossil fuels. This move not only sends a strong signal to global markets but also demonstrates the growing preference for investments aligned with sustainability goals.

Solar Energy: A Profitable and Ethical Alternative

Investing in solar energy is both an ethical choice and a financially rewarding one. Power Purchase Agreements (PPAs) generate stable income for utility-scale solar farms. These agreements allow power producers to sell electricity at a predetermined price for a specified period, typically ranging from 10 to 25 years.

Investing in utility-scale solar farms can also yield an internal rate of return (IRR) of 5-8%, depending on project specifics and market conditions. On a $100 million project, this can translate to $5-$8 million in revenue.

Shasta’s Summit Power Fund typically targets an IRR greater than 20%. We achieve this high IRR by maximizing development stage value, through partnerships with Independent Power Producers (IPP) for construction and operation. These IPPs seek shovel ready projects, and benefit from fully acquiring the assets once they are built. In the partnership process, they pay a premium for us developing and de-risking the project. The investment process is also straightforward. Contact Shasta Power to create an account, verify your eligibility to invest, sign the subscription agreement, and then wire your investment.

Divesting from fossil fuels not only aids the planet but also represents a sound financial decision as the market shifts toward sustainable energy. Investors can be part of the solution by aligning their portfolios with clean energy investments like those offered by Shasta Power. This approach allows them to drive change while benefiting from a stable, growing market.At Shasta Power, we help investors make a positive environmental and social impact. Visit our investment information page to learn more about our solar projects and investment opportunities.