| January 23, 2024
A survey of pension funds and insurance companies has found significant interest in increasing investment into renewable energy.
UK pension funds and insurers are keen to increase allocations to renewable energy in the coming years, according to new research.
A survey by AlphaReal, a specialist real assets manager, found that a majority of pension funds and insurers planned to increase their allocation to renewable energy in the next year.
The survey, which included institutions with a combined £360bn in assets under management, found that 90% of respondents planned to increase their allocation to renewables, with the remaining 10% open to the possibility.
The research also found that respondents expected their allocations to renewable energy to increase significantly in the next three years. More than a quarter (28%) of respondents anticipated increasing their allocations to 21% or more of the portfolios they manage, while two-fifths (39%) said they would increase their allocations to between 16% and 20% of overall assets.
“Pension funds and insurers are increasingly recognising the potential of renewable infrastructure to deliver competitive returns while contributing to environmental sustainability,” said Stuart Hanson, associate director for client solutions at AlphaReal.
The most common reason cited by respondents for increasing their allocation was the desire to generate an income (85%). Respondents also cited portfolio diversification (71%) and alignment with environmental, social and governance objectives (68%).
The research indicates a growing momentum in renewable energy investment. Data from BloombergNEF showed that more than $358bn (£283bn) was invested in this sector globally in the first six months of 2023, a 22% increase on the first half of 2022.
AlphaReal’s survey also found that the increased investment came with an expectation of strong returns. More than half (54%) of respondents anticipated returns of between 5% and 7.5% a year from renewable assets net of costs and without leverage. A further 38% expected returns to fall within the 7.5% to 10% range.
