Pension schemes have almost doubled their average exposure to renewable energy in the past two years, a survey has found.
The typical institutional allocation to cleaner energy sources stands at 3.6%, up from 2% in 2016, according to a survey by Aquila Capital.
This highlights that the world transitioning away from fossil fuel energy is becoming a major investment theme.
The research also discovered that 12% of institutional investors have between 10% and 15% of their portfolios in renewable energy.
Its popularity is not just driven by ethical concerns. The majority of pro-renewable investors (55%) are attracted by the sector’s long-term stable cash-flows, while 35% are drawn to geographic diversification and a low correlation to other assets.
Inflation hedging (33%) and fighting global warming (30%) were also catalysts.
Regulation was named as the greatest influence on the sector’s growth by 63% of institutional investors. Political risk, government subsidies and electricity prices were identified as drivers by 37% of those questioned.
The asset owners questioned by the alternative asset manager said they expect to continue investing in wind and solar assets in the next two years.