Performance is more important than SRI-related factors when assessing renewable infrastructure investment opportunities, according to the research conducted by Aquila Capital among European institutional investors.

Portfolio returns were cited as the main reason for investing in renewables by almost two thirds (63%) of respondents, while just 6% said they did so for environmental and ethical reasons. Diversification and inflation-hedging was identified by 12% and 9% of investors respectively as their primary driver for gaining exposure to renewable infrastructure.

More than half of institutions have some exposure to renewable infrastructure and currently allocate an average of 4% to this asset class, but the study suggests these figures are set to rise. Nearly seven in 10 (69%) expect to increase their exposure over the next three years, with 14% expecting the increase to be ‘significant’.

Investors’ biggest concern about renewable infrastructure is ‘the experience and track record of the managers of the assets’, cited by 51% of respondents.

Roman Rosslenbroich, CEO of Aquila Capital said, “This research clearly shows that investors are drawn to renewables by the attractive returns they can offer. The findings reflect our own experience: we are seeing increased demand for renewable infrastructure from institutional investors, as reflected by our €500m hydropower partnership with APG formed this summer". 

"Many factors need to be considered to ensure that investors have a combination of projects that delivers attractive risk-adjusted, long term returns. This is a rapidly evolving sector that is exposed to political and regulatory pressures and therefore requires a highly active asset management approach.”

Direct ownership and specialised funds are the most favoured form of vehicle to invest in renewable infrastructure (29% each), followed by closed-ended funds (24%), club deals/co-investments (9%) and managed accounts (3%).