The investment manager’s survey of 100 UK public and private sector pension funds and senior investment professionals – conducted in November last year – that collectively administer approximately £360bn in assets under management, revealed 95% of respondents said they anticipate increased allocations to renewable energy assets over the next five years.
Of the respondents who said they envisage increased allocations to renewable energy assets, over two-fifths (44%) said they intend to raise allocations by between 10% and 20%, while just over a third (35%) indicated they would raise allocations by up to 10%. The survey also showed 16% stated they would boost allocations by 20%, compared to 3% who reported their allocations would remain the same and 2% who stated their allocations would be reduced.
In response to an increase in demand for renewable energy, the survey’s respondents said they envisaged an upturn in the range of opportunities in the sector. The survey showed the majority (63%) said they expected there will be a slight increase in the number of opportunities available in the renewable sector, compared to one-third who said they anticipated “significant” increases. The remaining 4% said they expected the level of opportunities would remain the same.
The survey also showed analysis of the current levels of pricing and valuations for UK renewable assets, with 91% of respondents saying the current levels were either “very attractive” or “quite attractive”. The remaining 9% stated the levels were “reasonable”.
AlphaReal chief investment officer and head of sustainability Ed Palmer said: “Renewable energy is an important component in any sustainable investment strategy, offering long-term return potential while aligning with ESG objectives and playing a crucial role in the green transition. A greater range of investment opportunities in this sector will ensure pension funds and insurers are able to allocate to renewable energy both now and in the future.”
Head of client solutions Boris Mikhailov added: “It is not surprising that investors are looking at a wider range of investment opportunities. For example, battery storage is getting more traction in the UK as it could be a powerful return enhancer and diversifier of portfolios when combined with well-established and tested technologies such as onshore wind and solar.”
The investment manager’s survey follows similar research published earlier this year which showed nine in ten pension funds intend to increase renewable energy investments over the course of 2024 and nearly three-quarters of pension funds and insurers cited net-zero targets among the key factors for increased investment in renewable energy.
