Institutional investors are looking to increase their exposure to renewable infrastructure, according to a survey.
Aquila Capital, which surveyed 100 institutions, found that 61% expect to invest further in renewable assets.
While another 30% plan to maintain their investment levels over the next three years, just 3% predict a fall in allocations.
Aquila Group chief executive Roman Rosslenbroich said: “The survey shows that investors’ appetite for renewable infrastructure as a way to generate yield and improve portfolio returns is continuing to go from strength to strength.
“We are also seeing investors taking a more sophisticated view towards their renewable allocation strategy with increasing numbers opting to build a diversified portfolio, offering exposure to different subsectors, including hydropower.”
He added: “Typical correlation levels to other renewable energy investments such as wind power and photovoltaics are low, and their long-term cash flows are uncoupled from traditional asset classes such as equities and bonds.”
The research shows that nearly half (48%) of respondents cited portfolio diversification as the main reason for investing in renewables, closely followed by reliable long-term cash flows (44%) and portfolio returns (43%).
Environmental factors were cited by only 22% of investors as their primary driver.
Half of investors have a positive outlook for renewable infrastructure, including 9% who are very positive.
A further 43% have a neutral outlook for the asset class, and 7% are somewhat negative, half the number compared with the previous year.
Investors’ biggest concerns about renewable infrastructure are its limited scalability and investment volume – cited by 38% of investors – followed by regulatory hurdles (37%) and the experience and track record of managers (36%).
New technologies applied to thermal, geothermal and biomass are set to attract the biggest increases in investor allocations over the next three years.
Fifty-nine percent of institutional investors say their peers will be backing these emerging subsectors, with 9% predicting a dramatic rise.
More than half (54%) expect investors to increase their exposure to hydropower, 48% to offshore wind and 49% to solar.
The majority (64%) of European institutions have some exposure to renewable infrastructure and currently allocate an average of 4% to the asset class, but the study suggests the figure is set to rise, including 11% who believe the increase will be ‘significant’.
