Smart meters and home energy management technology are just two examples of the technological evolution of investment opportunities within natural resources. These new developments across the energy value chain are particularly impactful in Asia-Pacific, where energy typically forms a core component of an investor’s natural resources portfolio. Since 2017, the proportion of Asia-Pacific investors active in energy funds has increased by six percentage points to 88%, and funds focused on the strategy secured 95% of total natural resources capital raised in Asia-Pacific in 2018, as explored in the 2019 Preqin Global Natural Resources Report.
Perhaps in line with the advancing technology available to energy suppliers and their customers, a closer look at Asia-Pacific-based natural resources investors reveals that the preference for energy investments across commodity types has steadily increased since March 2017. Renewable energy is sought by 76% of investors in the region, though natural gas (69%) and oil (65%) are not far behind. Several large-scale upstream projects are planned for 2019 across Australia, Malaysia, Indonesia and Papua New Guinea, which may have contributed a renewed sense of optimism with regards to exploration and production in the sector.
Recent developments in Asia-Pacific indicate a clear preference for renewables, though. In 2018, China invested considerably in the sector with the objective of reducing solar costs, developing offshore wind and hybrid electric vehicle markets and encouraging more private capital investment in the space. In Australia, institutional investors target renewable energy assets to access private markets while fulfilling their environmental, social and governance policies. More recently, in 2019, a $60mn Singapore-based joint venture, CleanGrid Partners, was launched with the aim of improving the region’s access to electricity and to meet the demand for off-grid and decentralized electricity generation.
Digitalization, decentralization and de-carbonization have introduced innovation to the traditional energy value chain, and developments are coming thick and fast. Preqin data shows that 92% of Asia-Pacific-based LPs seeking to invest in natural resources in the next 12 months are targeting the energy sector, suggesting that investors are poised to capture opportunities presented by whatever developments 2019 will bring.
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