Pension funds, insurers to raise renewable energy allocation

Of those, over one third (35%) expect to raise their allocation by up to 10%, while nearly half (44%) plan to increase allocations by between 10% and 20%, and 16% are set to boost their allocations by over 20%

The vast majority (95%) of UK pension funds and insurers expect to raise their allocations to renewable energy assets over the next five years, research from AlphaReal has found.

Of those, over one third (35%) expect to raise their allocation by up to 10%, while nearly half (44%) plan to increase allocations by between 10% and 20%, and 16% are set to boost their allocations by over 20%.

In contrast, the remainder of respondents say there will be no change (3%) or a drop (2%) in allocations to renewable energy over the next five years.

Pricing was a key factor, as the research found over two fifths (42%) of respondents think the current levels of pricing and valuations for UK renewable assets are “very attractive”, while 49% think they are quite attractive, and the remaining 9% think they are reasonable.

In line with the increase in demand for renewable energy, UK pension funds and insurers also forecasted a rise in the range of opportunities in the sector, with one-third of respondents projecting “significant” increases, while 63% are expecting marginal increases, and 4% expect opportunities to invest will stay the same as they are today.

Commenting on the findings, AlphaReal CIO and head of sustainability, Ed Palmer, said: Renewable energy is an important component in any sustainable investment strategy, offering long-term return potential while aligning with ESG objectives and playing a vital role in the green transition.

He added: A greater range of investment opportunities in this sector will ensure pension funds and insurers are able to allocate to renewable energy both now and in the future.

Adding to this, AlphaReal head of client solutions, Boris Mikhailov, said that it is not surprising that investors are looking at a wider range of investment opportunities.

For instance, battery storage is getting more traction in the UK as it could be a powerful return enhancer and diversifier of portfolios when combined with well-established and tested technologies like onshore wind and solar, he added.