Preqin Study: European Public Pensions Embrace Cleantech Unlisted Infrastructure

(April 5, 2011) — Europe is leading the growth in cleantech unlisted infrastructure with public pension funds ranking as the most prominent investors, according to research carried out by Preqin.

“The cleantech and renewable energy infrastructure market has grown significantly over the past seven years, especially between 2007 and 2008 when the number of completed deals more than doubled,” Elliot Bradbrook, Manager of Infrastructure Data, said in a statement. “It is unsurprising that the industry is particularly advanced in Europe; all governments are bound by the 20:20:20 agreement and are offering strong incentives for development of clean technology and renewable energy solutions,” she stated, referring to the European Union’s overall goal of reducing greenhouse gas emissions and energy use by 2020.

Craig Metrick, Principal and US Head of Responsible Investment for Mercer, acknowledged that Europe’s regulatory environment makes investing in renewable energy easier and more appealing. “In Europe, there may be more direct deals than there are in the US,” he told aiCIO, noting that investing directly in clean tech requires a different level of due diligence. “In the US, funds may have the expertise to invest directly but it is more time and resource efficient to invest via private equity funds.” Metrick noted that one of the reasons that US institutional investors have not been as aggressive in investing in renewable energy compared to their European counterparts is because of a lack of legislation. “In Europe, there are certain regimes for reducing carbon emissions, fostering a better legislative environment, whereas the debate on climate change and renewable energy has been very politicized in the US.”

Preqin’s research found that 63% of cleantech and renewable energy deals completed by cleantech infrastructure managers have been made in assets based in Europe. Furthermore, 38% of investors in cleantech infrastructure funds are based in Europe, and the allocation to environmentally responsible investments are expected to continue to flourish. “Growth within the sector looks set to continue, as investors seek to make profitable commitments to environmentally friendly projects,” Preqin’s Bradbrook stated.