Real asset firms which are making a commitment to green infrastructure and in particular, renewable energy generation, are tipped to benefit from the evolving investment climate following Russia's invasion of Ukraine.
While war in the territory has driven up oil and gas prices still further, the share prices of renewable energy companies have also risen.
Typically, investors step back from renewable energy in bearish times, fleeing to defensive stocks including the traditional utilities of water and gas. However, the spotlight on European dependence on Russian pipelines has apparently altered investor tastes.
European-focused renewable energy specialists like Denmark's Orsted, Vestas and Nordex, as well as Spanish-German Siemens Gamesa all registered double-digit price rises on Monday.
At an emergency EU meeting in Brussels on Tuesday lunchtime, president of the European Commission Ursula von del Leyen said that the bloc should sieze the opportunity to "switch to renewables in the long-term", adding that energy independence would also "reduce the Russian war coffers".
Infrastructure plays
Real asset and real estate firms have increasingly expanded their infrastructure allocations in the last five years.
James Park, a New York-based partner at Sera Global within its real estate investment banking team, told PropertyEU: ‘Some forms of commercial real estate have similar characteristics to infrastructure, whether through lease design, indexation or liability. This increasingly blurs the lines between real assets, making the distinction between real estate and infrastructure less evident.’
While recent plays have included opportunites in telecoms towers and cabling firms, many real estate players have decided to specialise in clean energy infrastructure, across segments including solar power, onshore and offshore wind, and biomass.
This is because renewables tick the dual box of diversification and ESG-compliant investment.
Renewable champions
Nuveen, which already had a private infrastructure investment team prior to last year, bought renewable energy manager Glennmont Partners in 2021. Glennmont is one of Europe’s largest such managers with €2 bn-plus of assets under management targeting pure clean energy investments in solar power, onshore wind, offshore wind, and biomass. According to the firm, Glennmont is seen as the starting point ‘vertical’ of Nuveen’s newly launched infrastructure business under the real assets banner.
Nuveen also wants to grow its infrastructure business into the other verticals such as transportation to gain critical mass as its looks to at least treble its infrastructure AUM over the next five years. ‘Most importantly we want best of class capabilities for the verticals of infrastructure,’ said Mike Sales, Nuveen’s CEO of Real Assets.
Another major player which expanded its renewables capacity last year was Patrizia. The group bought out infrastructure player Whitehelm, with an initial focus on Australia and Europe.
However, Thomas Wels, co-CEO at Patrizia, said Whitehelm plans to invest globally, including in the US. Renewable energy and data are among the top investment priorities.
Whitehelm manages the Smart City Infrastructure Fund backed by Dutch asset manager APG which has considerable firepower to invest in the likes of urban strategies incorporating data centres, solar energy, and social care assets such as pre-schools.
Patrizia also thinks it can double the size of Whitehelm’s next infrastructure debt fund to around €1 bn.
Blackstone's green bids
Finally, Blackstone Real Estate has made increasing commitments to renewable energy in recent years.
Last October, Blackstone Property Partners Europe issued a debut green bond under its green financing framework, established in March 2021, to the tune of €500 mln. Proceeds are being used to fund eligible green investments including green buildings, renewable energy and energy efficiency projects.
In Finland, Blackstone portfolio company Sponda has proved itself a sustainability leader for some time. The firm recently inked a deal with Helen, one of the largest energy companies in the country, to back the construction of a new wind power farm in Ostrobothnia, Finland.
As a result, 100% of the electricity consumption in Sponda’s properties will be produced by emission-free wind power going forward. The agreement supports Sponda’s objective of carbon neutrality, highlighted in the company’s sustainability programme.
Said Caroline Hill, Blackstone Real Estate’s head of ESG in Europe: ‘The quantity of green energy we were committing to in this case facilitated the creation of a new wind farm. This is an example of additionality, which is very important to us.’
As of this year, 50% of the wind power used by Sponda to cover electricity consumption will be generated at Helen’s new Lakiakangas 3 wind farm. The remaining 50% of required electricity will be obtained from other Nordic wind farms.
