See Why Sovereign Wealth Funds are Betting on Clean Tech
Posted on 12/24/2020
2021 is approaching and sovereign wealth funds are increasingly taking a deeper look into ESG investing and sustainable investments, particularly in renewable energy. Despite the gloomy coronavirus lockdowns, sovereign wealth funds continue to allocate mounds of capital into clean tech investments. Sovereign investors are backing both new green technologies, while supporting large-scale solar and wind power plants. Even though the majority of European and Gulf-based sovereign wealth funds derive their wealth from fossil fuels, there is a greater need for them to diversify into alternative energy as low oil prices continue to toil. Low oil prices have deeply impacted the budgets of Gulf economies, forcing them faster to rethink their old ways of doing things. For example, Saudi Arabia was forced to lower its budget plan for 2021 by 7% from this year’s. This was due to the coronavirus lockdowns, which impacted the world economy, moving oil prices to multi-year lows.
CLEANTECH – Sovereign Wealth Funds Investing in Renewable Energy
Sovereign investors have been ready to deploy capital into green infrastructure, but remain cautious over finding suitable unlisted renewable-energy projects. Like any energy project, renewable energy projects are still bound to the laws of economic gravity. Sovereign funds are selecting partners and projects with track records, when it comes to larger commitments. Just in 2020, New Zealand Superannuation Fund invested in Galileo Green Energy, LLC, while Singapore’s GIC Private Limited sprinkled cash in ChargePoint, Inc. Mubadala Investment Company’s Masdar unit is backing wind farm projects globally, while the Abu Dhabi Investment Authority (ADIA) and GIC are invested in ReNew Power Ltd, one of the biggest renewable power independent energy producers in India. The Alaska Permanent Fund Corporation, PSP Investments, and the China Investment Corporation (CIC) are part of an investor group backing Equis Energy Ltd.
Renewable energy generation is only one petal in the cleantech space. Sovereign wealth funds have been investing in automobile manufacturers that benefit from renewable sources like Tesla, Inc., NIO, and Lucid Motors. Saudi Arabia’s Public Investment Fund (PIF) backed EV maker Lucid Motors, after it attempted to move closer on Tesla.
Beyond Sovereign Wealth Funds
The trend is going beyond sovereign wealth funds, as Canadian and European pension investors are taking the charge of creating renewable investment platforms. For example, Cubico Sustainable Investments was formed in 2015 by Ontario Teachers’ Pension Plan and PSP Investments to invest in renewable projects. In December 2020, Canada Pension Plan Investment Board (CPP Investments) formed a new platform Renewable Power Capital Limited (RPC). The platform is backed by CPP Investments’ multi-billion Power & Renewables investment strategy and will invest in solar, onshore wind, and battery storage, among other technologies, across Europe. The team is headed up by former GE Energy Financial Services. CPP Investments’ peer Caisse de dépôt et placement du Québec (CDPQ) revealed a US$ 1 billion commitment to Invenergy Renewables LLC (Invenergy), the largest private developer, owner and operator of wind and solar projects in North America, to further support the company in its expanded development activities and continued growth.
Despite policymakers waving at clean tech, sovereign funds are already putting capital into the sector at faster paces.