Retirement Income – Green Energy Bonds for High Yield Income

CoPower Green BondsRetirement income is a critical component of retirement. Regardless of how you classify retirement such as reaching financial independence or financial independence retire early (FIRE), you will need income to put food on the table and have shelter.

I like to focus on financial independence as the choice of working or not can be a choice to keep busy. To reach financial independence, you need to plan for your monthly income and aside from working, or having a pension, your investments will provide you with the income you need.

Sounds simple but it’s not always simple when there are so many options available when the risk of losing money and taking a step back comes into play. The higher the return the more risk you need to take but every now and again, an opportunity can come around where you can have a good rate of return with lower risks.

Green energy bonds from CoPower currently check a lot of the boxes as a safer investments providing a high income.

Profit with Green Energy Bonds

Investing is all about the future, and a growing number of investors are focused on green investments as opposed to sin stocks for a future that is cleaner and greener in both senses of the word.

With the rapid shift from oil, gas and coal to renewable sources of energy like solar, wind and geothermal, investors of all sizes are seeing an opportunity, and green bonds have become a popular choice for those looking to get in on the clean transition.

The main difference here is that the funds raised through green bonds help fund infrastructure projects that offer environmental benefits like renewable energy, transit, or energy efficiency.

Over the past decade, the green bond market has boomed. But until recently, this market has traditionally been off-limits to smaller investors, with issuances being snapped up in minutes by major institutional players like banks, pension funds and governments.

Canadian green investment company CoPower is changing that.

CoPower Green Bond
Source: CoPower

How Green Bonds with CoPower work

For Canadians wanting to put their money to work for a good return and green benefits, CoPower’s Green Bonds present an attractive opportunity.

Those with as little as $5,000 (or as much as $500,000) can invest in a 6-year Green Bond that offers 5% annually. In order to help investors meet their financial goals, bonds can be customized in a variety of ways. For example, both are eligible to be held in a TFSA or RRSP, and bondholders can opt to receive either quarterly fixed payments of simple interest, or reinvest and compound those payments for a higher payout at the end of the term.

CoPower’s innovation lies in bringing together investors seeking positive impact and clean energy projects seeking financing, but in order to make its bonds suitable for retail investors, the company has adopted an investment policy of ‘boring is better.’

The bonds are backed by a diversified portfolio of loans to real clean energy or energy efficiency projects. The company’s team of project development and finance professionals focuses on financing projects that use commercially available technologies, and in general, projects hold contracts for the sale of clean energy or efficiency services, ensuring stable, predictable revenue streams. As the project developers repay their loans to CoPower, those revenues flow through to bondholders as interest payments.

CoPower projects
Source: CoPower

CoPower’s current Green Bond loan portfolio includes over 750 projects including LED retrofits in condo buildings across the country, community solar installations in Ontario, and residential geothermal projects in British Columbia and Quebec.

In a period marked by public stock market volatility, Green Bonds offer another financial advantage. As a private investment, in other words not traded publicly, CoPower Green Bonds allow investors to further diversify their portfolios and shield returns from market downsides. It’s important to note that as a private investment the CoPower Green Bonds must be held to maturity–they’re suitable for those who buy and hold, not day traders–and investors will have less information to go on than they would with a public company.

How To Purchase a Green Bond

The simplest is to purchase through CoPower on their website. You will first have to create an account and make sure you understand the risks. The steps are outlined below.

CoPower - Account Process

Once the account is created, you will have a 15 minutes call with a CoPower advisor to ensure you completely understand the offering. It’s another opportunity to ask questions if you have some.

If holding your Green Bond in a TFSA or RRSP is important for a better tax treatment, Questrade is the best option. CoPower and Questrade are setup to make it easy for investors to hold the bond in a registered account. For more details on the process, you can find the details here. Be aware that Questrade has minimum balances to avoid quarterly fees if you are not using them already – you and your Spouse can contribute together to the minimum balance.

It is possible to hold the bonds with any other discount brokers but you have to work through the institution to make it happen. It will take time and it will cost you money. Double check with your institutions prior to going down this path.

CoPower High Yield Bonds
Source: CoPower

What are the risks?

As pointed out earlier, investors have to hold the bond through maturity. You will not have access to your money until maturity. It’s an important factor to be aware of as there is no secondary market unlike other bonds.

Another point to note is that you are a lender to project developers as opposed to a lender to the government or a large corporation like Bell. In most cases, the developers cannot get the loans from the major financial institutions or the costs are prohibitive and they resort to private lenders.

While those are the risks, you are handsomely paid to get communities become greener one project at a time. As you can see from the RBC bonds list, not many pay a 5% rate.

RBC Bonds

A Worthy Green Investment for Your Portfolio

I will admit not knowing what to expect but after reading the details on Green Bonds, I find it an interesting option. The account opening process was simple. Earning 5% for 6 years is better than most REITs and it beats nearly 95% of the bonds in the secondary market. You should definitely learn more about the investment to see if it’s a fit for your portfolio.

Learn more about the Green Bonds issued by CoPower here.

This post has been brought to you in partnership with CoPower. All views are my own. Full details are available in the CoPower Green Bond III Offering Memorandum.

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