Institutional investors almost double exposure to renewable infrastructure in two years, says new research
A new study among institutional investors, commissioned by Aquila Capital, reveals that average portfolio exposure to renewable infrastructure has risen to 3.6 per cent, up from 2 per cent in 2016.
Over one in 10 institutional investors (12 per cent) who were surveyed now allocate between 10-15 per cent of their assets to renewable energy infrastructure.
Rising allocations to renewable infrastructure are reflective of investors’ attitude towards the asset class – three-quarters (75 per cent) of investors said they were positive about the future of renewable infrastructure, an increase of 9 per cent on 2016, when the figure was 66 per cent. Between now and 2021, investors expect the biggest increases in their investment allocations will be made to offshore wind, solar thermal and onshore wind.
Aquila Capital’s research analysed the key drivers behind investors committing more capital to renewables. The most important reason, cited by the majority (55 per cent) of investors, is long-term stable cash-flows, followed by geographic diversification and low correlation to other asset classes (both 35 per cent), inflation hedging (33 per cent) and fulfilment of ethical standards (30 per cent).
Almost two-thirds (63 per cent) of respondents flagged regulatory risk as the greatest challenge influencing their decision towards investing in renewable infrastructure. The next biggest challenges, identified by a significantly lower number of investors (37 per cent), were political risk, government subsidies and the development of electricity prices.
Susanne Wermter (pictured), Head of Investment Management Energy & Infrastructure EMEA, Aquila Capital, says: “Investors have been allocating increasing amounts of capital to renewable infrastructure in recent years and, given the positive outlook expressed in our research, there is every reason to believe that this trend will continue. “
“With concerns of a global capital market correction mounting, the investment case for renewable energy remains compelling. Investors are increasingly looking beyond ethical considerations when committing capital to renewable infrastructure funds. “
“Looking ahead, new investment opportunities continue to emerge as Europe accelerates its energy transition from fossil fuels to renewables. In April last year we launched the Energy Transition Infrastructure Strategy (ETIF), which capitalises on this trend by investing across the three key subsectors of the energy transition, namely renewable energy generation, energy storage and energy transportation.”