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Investors seize the opportunity of transition to renewables

It’s the best time ever to invest in energy but there are risks as well as opportunities, delegates heard at Real Asset Media’s Infrastructure summit: investing in new energy briefing, which was held online on REALX.Global recently.

Alejandro Ciruelos, MD renewable energy, SDCL

“In my 15 years in the sector there has never been a better moment to invest in renewable energy”, said Alejandro Ciruelos, managing director, renewable energy, Sustainable Development Capital LLP. “But there is too much capital chasing the same opportunities, so you need to be selective. Some investors will make the wrong choices”.

The rush to invest has already resulted in some casualties.

“Some funds have come under pressure”, said Jim Wright, listed infrastructure fund manager, Premier Miton Investors. “Competitive bidding rounds have increased the prices paid and put pressure on returns”.

However, the wealth of opportunities out there is such that if you seek you shall find, he said.

“If we’re to go anywhere near meeting the net zero carbon targets set, we’ll need huge investments in renewables, so there will be plenty of opportunities everywhere on a global level”, Wright said. “Investment has to be properly directed, but we’re very constructive on the overall investment case for energy transition”.

There’s a clear shift from institutional capital into green investments, which are already supported by the regulatory framework.

Investors will be rewarded, said Thomas Veith, Partner – Leader Real Estate / Real Assets, PricewaterhouseCoopers: “If you include ESG and decarbonisation in your business plan, returns tend to be higher”.

Fast-moving technology developments are making the transition to net zero easier and quicker and creating new opportunities for investors all the time.

“It’s very exciting”, said Ciruelos. “Offshore wind, for example, is the fastest growing renewable source of energy at a global level, which is very exciting”, said Ciruelos. “It’s about finding the right pockets of opportunities at the right value”.

With more capital flowing into the sector, it’s important to take a forward-looking approach and focus on future potential rather than the present situation.

“Companies and utilities inevitably have legacy issues, they may still be using coal”, said Thomas van der Meij, senior portfolio manager infrastructure, Kempen Capital Management. “However, if they’re on the pathway to becoming better then we see the opportunity of allocating capital and making a real difference by enabling that transition”.