Institutional investors are expected to almost double their spending on renewable energy over the next five years, investing an additional $210bn in the industry, according to a new report.
A global survey of 100 institutional investors — big financial institutions that tend to invest other people’s money, such as pension funds, investment banks, commercial trusts, endowment funds and hedge funds — showed that those already active in the renewables sector will increase allocations to the industry from 4.4% of their investments to 7.1% — an additional $197bn.
Institutions that have yet to invest in renewables said they would allocate an average of 5.8% of their funds to the sector over the next five years — a total of $13bn, said the survey, which was carried out by UK-based renewables investor Octopus Group.
These figures would be even higher with better support and policies from governments, the study found, with 52% of respondents saying this would encourage them to invest more in renewables.
Utility-scale solar was the favourite type of renewables investment, with 43% of the surveyed institutions investing in the sector, followed by onshore and offshore wind (both 28%), hydro (27%) and biomass/energy from waste (24%). A further 40% said they would consider investing in grid-scale PV, followed by 48% in onshore wind, 58% in offshore wind, 49% in hydro and 61% in biomass/energy from waste.
The most attractive renewables market for the institutions was the UK, where 61% of respondents said they would consider investing, followed by the Nordics (49%), Italy (46%), Japan (43%) and Australia, France and Germany (all on 39%). The most unattractive markets were Latin America and the Middle East (where only 18% would consider investing), followed by Africa (24%), India and Eastern Europe (30%) and China, South Korea, Ireland, the Benelux countries, and Spain and Portugal (all on 33%).
The biggest barrier to investment was said to be energy price uncertainties, with 56% of respondents saying this held back their renewables investments, while 35% said a lack of expertise in renewables within their company was holding back further investments.
