GLarge institutional investors such as insurers and pension funds are well suited to finance the energy transition and the expansion of the broadband network with borrowed capital. The industry itself sees it that way after a recent hour by the analysis company Zielke Research and the Hamburg Commercial Bank. But because of their business model, they do not see themselves as investors for not yet fully developed pioneering technologies.
They also expect growing competitive pressure among market participants who are looking for promising sustainable investment projects. This is the result of a survey for the study among 56 insurers, pension funds and asset managers.
In their responses, institutional investors stated that in the infrastructure segment they were investing primarily in renewable energy and telecommunications. Around nine out of ten of the companies surveyed have already invested in energy networks (93 percent), solar systems and wind turbines on land (“onshore”). Even in wind power on the high seas (“offshore”), 85 percent of the companies have already participated in the form of external financing.
Forests, geothermal energy and biomass are of less interest
On the other hand, they are less involved in forest investments (with 26 percent the lowest value), geothermal energy and biomass. Conventional infrastructure projects such as ports or airports are in the middle of the field. In contrast, telecommunications and broadband networks have a higher share of around three quarters and are classified by investors as systems with high future potential.
All investors have already made investments in Western Europe; North America (with 81 percent) is the preferred region, ahead of Southern Europe (71 percent). Around a third of investors still dared to go to Asia, but only 6 percent have so far invested in Africa. What is striking is the type of debt capital they use. Two thirds said in the survey that more than half of the total investments were made as debt capital in the form of loans.
Almost the rest of the respondents answered that no more than a quarter invested in debt. There is a clear division of the market here. Almost all of them considered long contractual ties to be feasible, 60 percent also considered desirable. Most of the investors invest through funds, but half of them see themselves in a position to invest directly.
Low interest rates compel us to look for alternatives
Pension institutions are looking for alternatives because of the low interest rates on the capital market. That is why they are increasingly getting involved in alternative investments. Because the Solvency II supervisory law penalizes deviations in the term of obligations and investments, long terms of externally financed infrastructure projects are particularly suitable for your financial investment. The majority of the industry welcomes the fact that the European regulation and the introduction of a taxonomy of green financial products are changing into sustainable forms of investment.
For more than two thirds of the investors, green bonds and ESG bonds (after the English terms environment, social, governance) play a role. In contrast, less than a third of investors base future investment decisions on green Pfandbriefe and green loans. Solvency II, European supervisory law, plays a much more important role in their strategic plans than the taxonomy that is currently emerging for green financial products. Accordingly, only every sixth investor has drawn up their own catalog of criteria for sustainable capital investment.
The majority of insurers, pension funds and asset managers have not yet drawn up a schedule to achieve climate neutrality in their investments. “Some of the financial institutions still have important decisions to make for their range of investments,” says the study. These investors want to be involved in the addition of photovoltaic systems and wind power.
On the way to climate neutrality, insurers could play an important role, says co-author Carsten Zielke: “Yes, I think insurers will manage it. The banks have to do more preparatory work here. ”It is more demanding to check a loan book for sustainability risks than the investment portfolio of an insurer. Banks are dependent on the cooperation of their customers here.
In his survey, 90 percent of the investors said they also found broadband expansion attractive, 72 percent want to get involved in data centers, but only 55 percent in building the charging station infrastructure for e-cars. The pension institutions are also reluctant to use hydrogen as long as the technology is not yet fully developed.