The speed of deploying renewable infrastructure is the biggest obstacle to investors looking to fund green energy initiatives, according to a survey commissioned by AlphaReal.
The survey of UK pension funds and insurers, collectively overseeing over £350bn in assets, revealed the top three barriers to investing in renewable infrastructure with almost four-fifths (79%) of respondents selected ‘putting their capital to work swiftly’, while 70% selected ‘policy and regulatory uncertainty’, and 68% cited ‘illiquidity’.
Raza Ali, fund manager, renewable infrastructure, at AlphaReal, said: “Speed of deployment is a concern to many investors, making it important to partner with an established investment manager with a track record in the sector. Doing so ensures ample access to opportunities including off-market transactions, as well as efficient evaluation.
“Buying unlevered also allows due diligence to be targeted solely for the needs of investors, as opposed to debt where the interests of debt holders need to be factored in, further improving the speed of deployment.”
In terms of the stage of the asset lifecycle to invest in, almost half (47%) of UK pension funds and insurers surveyed noted a preference for pre-greenfield development stage projects. One-third (33%) liked greenfield, fully consented projects with energisation dates, and approximately one-fifth (19%) preferred brownfield sites where the asset is operational and generating revenues.
Meanwhile, 82% of respondents said they look to invest in the UK only; 12% consider opportunities across Europe; and 6% worldwide.
“Many defined benefit schemes are now closer to buyout and less able to invest in illiquid assets, unless adopting a low dependency strategy,” added Stuart Hanson, client solutions at AlphaReal.
“However, we are seeing insurers, local government pension scheme investors, and, more recently, defined contribution funds making significant allocations to renewable infrastructure projects throughout the UK. These long-term investors should continue to benefit from the equity-like returns and attractive income profiles that can be provided by renewable infrastructure.”
