Drive to reach net zero encourages pension funds and insurers to invest in renewable energy

A survey of UK pension funds and insurers that collectively oversee £359.82 billion in assets, commissioned by AlphaReal, the specialist manager of secure income real assets, reveals that when asked to select the three main ESG drivers for investing in renewable energy, almost three-quarters (72%) selected measurable targets and benefits including achieving Net Zero carbon emissions by 2050.

Climate risk mitigation was the second biggest ESG driver for UK pensions funds and insurers when investing in renewable energy (71% of survey respondents selected this in their top three), while almost two-thirds (65%) cited energy security, job creation and economic growth.

More than half (57%) of UK pension funds and insurers responding to the survey say investing in renewable energy helps them comply with environmental conventions and regulatory frameworks, while just over a third (35%) say the asset class aligns with their ESG investment values.

Nearly all (93%) of the funds surveyed say they have declared a Net Zero target, while 7% are yet to do so.

Looking at the likely timeframes within which pension funds and insurers will hit their Net Zero targets, 50% say within the next five years; 44% say within five to ten years; 3% say within ten to twenty years, while 3% say they have already reached their goal.

Maria Vaggione, Senior ESG Associate at AlphaReal said: “It is extremely encouraging that so many pension funds and insurers have announced a Net Zero target, and that ESG investments are being selected with regard to measurable targets and benefits. Investors clearly recognise that renewable energy is an excellent way to align with Net Zero targets and to contribute to the green transition.”

Raza Ali, Investment Director, Renewable Infrastructure at AlphaReal said: “UK pension funds and insurers are well on course to meet their Net Zero carbon emissions goals by 2050 and the role of renewable energy investment is paramount to them getting across the line. AlphaReal’s renewable energy investments have helped to generate over 550,000 MWh of clean energy a year which has offset 118,000 tonnes of CO2e.”