The majority (90 per cent) of UK insurers and pension funds plan to increase their allocation to renewable energy in the next 12 months, while the remaining 10 per cent said they might make increases, according to research commissioned by Alpha Real Capital.

Of those planning to make increases in renewable energy investment over the next year, 8 per cent said they will make increases of 4-6 per cent; 12 per cent said they will raise allocations by 7 per cent; 21 per cent will make increases of 8 per cent and the majority (59 per cent) expect to increase by more than this.

The bulk (45 per cent) of current allocations to renewable energy are between 11 and 15 per cent.

In addition to this, 21 per cent said they invest 16-20 per cent in renewable energy; 16 per cent invest 6-10 per cent; and 18 per cent of investors allocate between 1-5 per cent.

In the next three years, allocations are expected to be significantly higher than today. Five per cent said they will boost allocations by 1-5 per cent; 7 per cent said 6-10 per cent; one fifth (21 per cent) said 1—15 per cent; two fifths (39 per cent) said 16-20 per cent; while just over a quarter (28 per cent) said allocations will increase by 21 per cent or more.

Eighty-five per cent of investors said income generation is their top reason for investing in renewable infrastructure assets, whilst 71 per cent said portfolio diversification was the main reason.

More than two-thirds of investors said the asset class is a way to align with their ESG investment objectives. Furthermore, over two-fifths (44 per cent) said renewable assets are a good means to generate long-term cashflows while one third are motivated by the return potential.

In terms of need for immediate yield post investment, 88 per cent of investors said this is a requirement while 12 per cent said it is not.

AlphaReal associate director, client solutions, Stuart Hanson, said: “Insurers and pension funds’ growing appetite for renewable infrastructure recognises that these assets can provide an attractive risk-adjusted return alongside positively contributing towards the transition to clean energy.”

Alpha Real Capital commissioned the market research company Pureprofile to survey 100 UK public and private pension fund, and insurance senior investment professionals in the UK.

Collectively they manage £359.82bn in AuM. Interviews were conducted online in November 2023.

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