A new Refinitiv report explores the trends, participants and data powering a sustainable infrastructure boom.
- Data from Refinitiv Infrastructure 360 shows that US$272bn in sustainable infrastructure projects were announced in 2020 – nearly double the levels seen a decade ago.
- Several factors are at play here, with climate change and geopolitical pressures at the forefront.
- While abound with opportunity, investors need to be cautious. Managing the risks associated with this new asset class will require the right combination of high-quality data, deep industry insight and powerful analytics.
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With climate the central focus of Joe Biden’s first 100 days in office, we are currently witnessing a global surge in sustainable infrastructure.
A large part of Biden’s $2.3 trillion infrastructure plan is aimed at making the U.S. power network carbon neutral by 2035, through investments in the electricity grid, and tax credits to support renewable energy.
In parallel, the EU and India have agreed to build joint infrastructure projects around the world, notably in Africa, with both sides pledging to collaborate in renewable energy, energy storage technology and modernising power grids.
A new Refinitiv report, Cashing in on the sustainable infrastructure green rush, analyses the reasons for this shift towards renewables, and unpacks the information participants – whether investment bankers, pension fund providers or portfolio managers – will require to take advantage of this new asset class.
Renewable power projects on the rise
Based on data tracked in Refinitiv Infrastructure 360, the report reveals several global trends emerging in this space.
The first is that the number of announced projects categorised as renewables (such as biomass, geothermal, hydroelectric, solar and wind) has been steadily increasing over the past ten years, with $272bn being announced in 2020 – nearly double the levels seen a decade prior.
Wind power leading the way
Secondly, we are seeing a global rush into wind power, driven again by major economies. The Biden administration recently unveiled a goal to deploy 30 gigawatts of offshore wind energy by 2030 – and made strides towards this with the approval of the nation’s first major offshore wind farm.
According to Refinitiv Infrastructure 360, a total of US$55.3bn in new wind projects were announced in the first quarter of 2021, more than double the amount announced during the first quarter of 2020 ($21.9bn).
Despite this abundance of activity, steep competition surrounds offshore wind power licences.
Firms are keen to increase their renewable power portfolios to satisfy both investors and governments, with German utility firm EnBW and British energy giant BP recently paying a record US$1.38bn to secure rights to an offshore seabed in the Irish Sea.
Capital flowing into sustainable infrastructure
Perhaps the most significant trend identified for financiers is that capital is flowing into these sustainable infrastructure projects at a rapid pace.
The launch of Blackrock’s $4.8bn global renewable power fund in April, supported by over 100 institutional investors in more than 18 countries, illustrates the increasing appetite for sustainable investments.
Data from Refinitiv Lipper tells us the number of ethical infrastructure funds in the UK has risen from 11 to 26 in the past five years – with total assets under management increasing from £1.687bn to £9.273bn.
In terms of deals financed, the proportion of financing for renewable power projects continued to increase in 2020, despite the pandemic. The power sector accounted for $US132.7bn of global loan volumes in 2020, with 72 percent of that volume focused on renewable energy projects.
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A balancing act
While there is a great deal of potential for investors, there is also a growing need for more comprehensive data offerings and valuation tools.
As PFI’s Rod Morrison explains: “The amount of funds being raised, the willingness of companies such as BP and EnBW to pay top dollar for seabed rights, and the financing of projects at zero percent interest rates are all signals of a gold rush mentality that will certainly create its fair share of opportunities, but also a great deal of risk”.
Participants will need to consider both financial and operational risk. Given cost overruns on infrastructure projects typically exceed 25 percent, quality data is needed to ensure investors gain a complete view on risk, regulatory compliance and lender, investor and advisor profiles.
Dive into Cashing in on the sustainable infrastructure green rush for further insights on key players, geographical and financing trends – and the role of special purpose acquisition companies (SPACs) in broadening access to these type of deals.