The risk or reward of green energy projects

The Government backs green energy, such as solar panels (AP)

Investing in sustainable green-energy projects can be a way to help the environment while pocketing a decent return.

This week there have been four new, but offbeat, opportunities offered to investors. But whether you're keen to be green or simply attracted by the high returns offered, it's important to understand the risks when you stray from the mainstream.

For starters do you think you know the difference between a fund and a bond? What about a mini-bond? And how about crowdfunding?

These are the investment terms you need to consider before embracing this week's set of green opportunities, especially as they all appear to offer some sort of guarantee. For starters there's the Foresight Solar Fund. According to its managers – who already look after £498m-worth of investors' funds – it's "a low-risk, infrastructure-type investment in solar assets offering investors a guaranteed, inflation-linked return of 6 per cent in the first year".

It's effectively a share issue and investors need to stump up at least £1,000. The money raised – they're hoping to get £200m – will be used to buy eight solar parks in locations such as Wymeswold, near Loughborough.

Next there's the corporate bond offered by stock market-listed renewable electricity supplier Good Energy. It offers an income of 7.25 per cent a year but you must invest at least £500 for four years. The company – which has around 100,000 customers – is looking to raise £5m to build solar and wind panels.

Then there's the mini-bond offered by Australian firm CBD Energy. It's offering UK investors annual income of 6.5 per cent for a minimum investment of £2,000 for three years in a subsidiary company, Secured Energy Bonds. The company hopes to raise £7.5m with the cash earmarked to fund the development of rooftop solar sites on farm buildings and factories across the country.

Finally there's a fixed-return renewable-energy investment – a debenture – from crowdfunding specialists Abundance Generation. The company is a Financial Conduct Authority-regulated finance platform which lets small investors invest directly in UK renewable-energy projects with as little as £5.

This week's offer – the company's sixth – is for SunShare Community Nottingham which needs £750,000 of refinancing. The solar-energy project has roof panels installed on 20 sites across Nottingham, each associated with children's development – including nursery, primary and special-needs schools, Sure Start centres, two leisure centres and a library.

The debenture will pay an effective rate of return of 6.5 per cent over the 19-year life of the investment, although there's also a secondary market which can allow you to get out early.

Abundance co-founder Bruce Davis said: "There are a number of bonds being issued currently. Good Energy has issued a corporate bond, which is a private offering, non-transferable and not tradeable. They have built their business using customers as investors and this is a significant increase in the amount they are raising. The interest rate is 7.25 per cent which reflects the risk of investing in the company in general.

"There are also a couple of equity funds which are setting up with the aim of investing in renewable-energy generation, but again you have no control over the projects that are invested in," Mr Davis pointed out.

In short, investing in these green projects means a closer examination of where the cash is going to ensure they meet your ethical aims, but also an understanding of the finances and how much your cash is at risk.