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UK investors and wealth managers increasing their allocation to renewables

960 640 Stuart O'Brien

Research from Downing LLP (Downing) has revealed a dramatic increase in focus on renewables from UK pension funds, other institutional investors and wealth managers.

Downing offers both institutional and retail investors the opportunity to invest in renewable energy and other infrastructure in the UK and northern Europe.

Its survey of 100 UK professional investors, who collectively manage around £118 billion in assets under management, reveals 80% increased their allocation to renewables over the past 12 months with 26% making a dramatic increase while 54% made a slight increase.

Nearly all (97%) of the respondents say they will increase their allocation to renewable energy in the next year.

Henrik Dahlstrom, Investment Director at Downing Renewables & Infrastructure Trust, said: “As the renewables sector develops, it increasingly illustrates several features that investors find very attractive, especially in the current environment of low yields and rising inflation – both issues renewables can help investors to address.”

Downing’s research found all renewable energy sectors are expected to attract more investment, and when asked to select their top five reasons for this, three-quarters (74%) of professional investors surveyed cite the asset class’s recent strong performance, and the de-risking potential in volatile markets (69%).

Other attractions of investing in renewable energy included the diversification potential (67%); improved regulatory environment for investing in renewables (67%); a growing focus on decarbonisation from pension funds and wealth managers (62%); improved liquidity (60%); a good hedge against inflation (55%); and a greater pressure to invest in renewables (46%).

The sectors most likely to attract increased investment are as follows:

  Increase dramatically Increase slightly Stay the same Decrease
Wind 39% 40% 21% 0%
Solar 38% 18% 41% 3%
Hydro 41% 44% 13% 2%
Biomass 38% 46% 9% 7%
Tidal and wave 29% 47% 23% 1%

Dahlstrom added: “Renewable energy is central to UK institutional investors and wealth managers as they set responsible and ESG investment strategies. We have long capitalised on the diversification benefits of investing in renewable energy and as inflation bites and market volatility continues, allocating to the asset class will become even more important.

“It is important that investors can find genuine investment opportunities that help them meet their ESG credentials. Our investment trust DORE, for example, is one of the few funds classified as an Article 9 fund under the EU’s Sustainable Finance Disclosure Requirement (SFDR), which means we make impactful investments and have specific Sustainable Investment Objectives.”

Over the last 12 years, Downing has invested in more than 175 core renewables projects across Europe.

These renewable energy investing projects have stable, predictable, long-term cashflows and are often wholly or partly linked to inflation.