Report finds institutional investors can contribute significantly to renewables

Government policies and investment practices are limiting the potential of renewable energy, a study has revealed.

The report by the Climate Policy Initiative (CPI), entitled The Challenge of Institutional Investment in Renewable Energy, has that institutional investors, including pension funds, hedge funds, investment advisors and insurance companies, are limited to the amount they can invest into renewable energy projects.

Globally, institutional investors manage a combined $71 trillion, offering them great control over one of the largest pools of private capital in the world. The study revealed that up to half of the finance required to develop renewable energy projects between now and 2035 can come from institutional investments if policies were moved onto more sustainable, long-term footings.

The CPI report demonstrates that by making green energy investments available, institutional investors could enhance the performance of their portfolios whilst lowering the cost of capital for renewable energy and decarbonising the market.

Options to increase the involvement of institutional investors, stated by the CPI report, include modifying financial regulation and national pension policies, removing policy barriers and strengthening the role of potential corporate investors in renewable energy.

“Policymakers and renewable energy project developers often look to institutional investment as a potential source of capital that can help reduce the cost of wind and solar projects”, said David Nelson, senior director of the CPI and co-author of the study.

“Our findings suggest that in the near future, this is unlikely to be the case without drastic shifts in government policy, regulation and investment practices.”

Institutional investor groups have previously collaborated to urge governments to act upon dangerous methane levels, whilst also publishing a report that highlighted the lack of definitive action being taken against climate change.

Further reading:

Investors urge governments to act upon dangerous methane levels

Investor report highlights gap between climate change and action

Biggest global investors call for urgent action on climate change

Investors demand government action to avoid dangerous climate change impacts