A majority (90 per cent) of U.K. pension funds and insurers say they plan to increase allocations to renewable energy infrastructure in the next 12 months, according to a survey from Alpha Real Capital.
The survey, which polled U.K. pension funds and insurers that collectively have roughly £360 billion in assets under management, found more than a quarter (28 per cent) plan to increase allocations to renewable energy assets by 21 per cent or more over the next three years, while two-fifths (39 per cent) will raise their exposure between 16 per cent and 20 per cent. Six in 10 (59 per cent) expect to increase investment in renewable energy by more than eight per cent in the next year.
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Indeed, 44 per cent of respondents said they value renewable energy assets as a good method to generate long-term cash flows. Respondents cited income generation (85 per cent) as the No. 1 reason to invest in renewable infrastructure assets, followed by portfolio diversification (71 per cent) and the alignment of environmental, social and corporate governance investment objectives (68 per cent).
While the majority (88 per cent) of respondents consider ‘immediate yield post investment’ to be a requirement of investing in renewable energy infrastructure, 12 per cent disagreed. More than half (54 per cent) expect to see a return from unlevered renewable assets’ net expenses between five per cent and 7.5 per cent per year and more than a third (38 per cent) expect yearly returns of between 7.5 per cent and 10 per cent.
“Pension funds and insurers’ growing appetite for renewable infrastructure recognizes that these assets can provide an attractive risk-adjusted return alongside positively contributing towards the transition to clean energy,” said Stuart Hanson, associate director of client solutions at AlphaReal, in a press release.