Family Office Investing: Solar Industry Opportunities
By Charles Schaffer
Family Offices have many investment options for preserving and distributing their financial resources across generations.
Richard Wilson’s InvestorClub.com is an excellent resource for family offices. His organization has over 7,500 UHNW members.
The Family Office Landscape
Because family offices are, by definition, private affairs, estimates of their number vary widely. According to Family Wealth Report, there are 6,000 known single-family offices (SFOs) globally.
How much money do these family offices control? Confidentiality makes it hard to estimate.
In 2018, Swiss bank UBS conducted 311 online surveys and interviewed leaders of 25 single-family offices. It reported that, on average, each office managed about $800 million in assets. Calculated across thousands of offices, the investment potential is well into the trillions of dollars.
The Solar Alternative
Investing in solar energy meets a growing demand for impact investing, in which funds generate beneficial social or environmental impacts alongside financial returns.
Historically, high net-worth families tend to want their wealth to serve a philanthropic purpose.
Family offices can move the needle with their collective investment muscle and dramatically expand solar utilization in the under-funded commercial solar space. Not only does solar investments make sense for family offices now, but they are making a tangible difference for future generations.
Netting Tax Benefits
Because they don’t pay income taxes, nonprofits such as churches and schools can’t take advantage of the tax benefits that reduce the capital outlay for a solar project. But outside investors who own those solar projects can do so.
Among those solar benefits is the federal investment tax credit, or ITC, which applies dollar-for-dollar against income taxes owed.
Land Development for Utility-Scale Solar
A growing opportunity for solar energy is an equity position in land for solar farm development.
Owners of rural acreage in states like Arizona and California may be looking at an alternative to crops, especially in areas with water shortages.
In some cases, owners are willing to lease their land to investors so the property can be prepared for a future utility-scale solar plant.
The investor exit is that the land will be sold to a solar farm developer. The solar equipment — arrays, batteries, and inverters – is a much more significant capital investment.
Investing for Social Returns
Instead of donating money to nonprofits, social investing in a non-profit’s solar project offers multiple benefits. It boosts a family office’s portfolio, generates income for the project's duration, and leaves additional money available that otherwise would have gone to taxes. And it’s not just a one-time gift; solar reduces a non-profit’s operational costs yearly for two decades while creating sustainable, clean power.
“In the end, if we hold onto $1 million that might otherwise go to the IRS and we’re able to get 6% or even a 10% yield on that money, that’s a significant benefit to the family,” says financial advisor Mark Trewitt. “It stays in the family office economy and can be used for further charitable giving.”
One family Trewitt introduced to SDC Energy invested in two Christian church solar projects over two years. After depreciation and other tax benefits conclude in 2024, the family will recognize income that can be offset with a charitable donation, or they can choose to pay taxes on it at that time.
“Our investors were very pleased that they were helping churches and any other non-profits aligned with their faith,” said Trewitt, author of Integrated Generosity for Faith-Based Families. “The economics of investing in solar attracted them initially, but they have come to appreciate the opportunity to balance their heart with their portfolio.”
Directed philanthropy through solar financing lets investors elevate their impact by protecting the planet, supporting philanthropic organizations, and boosting their portfolios.
Charles Schaffer
President and Founder, SDC Energy
Charles has founded and operated several development companies over his 35+ year history to pursue his passion for Alternative Investing where he believes outsized returns can be achieved without a corresponding increase in risk. Under Charles' leadership, SDC has developed and financed over $80 million of commercial real estate and renewable energy projects.
