Top-Down Trends Supporting Clean Energy and Technologies
From time to time, we take stock of how some of the world’s largest asset allocators plan on shifting their investment priorities. According to survey data from Blackrock some notable trends include:
Globally, investors are concerned that the economic cycle is turning…this trend is most pronounced in the US and Canada, where 68% of clients plan to reduce equity allocations.
Respondents are most focused on reducing public market risk within the equity portfolio (41% cited this as one of their top two priorities).
An increasing emphasis on ESG and impact investing was cited by 27% of respondents, largely driven by EMEA clients (+55%).
A significant portion of institutions intend to increase their exposure private markets: real assets (+54%), private equity (+47%) and real estate (+40%).
So, what does this mean for a small (but growing) cleantech focused group like Inerjys? Well, in our view, these trends work to improve the climate (pardon the pun) for investing in renewables and clean energy.
We are particularly optimistic about the shifting trends into ESG and impact investing, demonstrating that climate change is gaining greater bandwidth in asset allocation decisions. Canada’s largest pension funds are incorporating ESG principles into their investing: representing 38% of total assets under management in 2016 (versus just over 20% for the US and well behind Europe at over 50%. While a positive development, clean energy investment relative to GDP in Canada still lags our G7 counterparts. We view that this represents an opportunity for Canada’s largest asset owners (and allocators) to direct a greater proportion of assets into clean energy, whether through direct investing into clean technology companies or projects, or via funds dedicated exclusively to clean energy and/or impact investing mandates.
Second, the move into Real Assets and PE, which typically have longer investment horizons and are not subject to the same volatility effects as public market equities indicates that there’s opportunity for asset allocators to lengthen their return horizons, thus moving into longer-term investing vehicles and mandates. This is crucial for creating the funding base necessary for the new energy transformation as investment into clean energy requires patient capital and longer funding horizons to ensure technology commercialization and widespread market adoption.
At Inerjys, we are investing in companies which have positive, measurable impact: from microgrid solutions to innovative renewable energy applications, zero-emission transportation solutions, to zero-waste and upcycled foods. Our portfolio companies are making a difference in the new energy transformation, and with an identified and validated pipeline of opportunities in the queue, we will continue to invest in this manner going forward.
Jennifer Wood
VICE PRESIDENT
Jennifer brings over 15 years of capital markets experience to Inerjys, with previous roles in equity research as well as institutional relationship management covering large, US-based financial institutions. Her role with Inerjys is to build out and manage our relationships with portfolio companies as well as institutional investors – including consultants, pensions, foundations and endowments who are focused on clean technology and impact investing.