Preqin’s Infrastructure Online service currently tracks 450 institutional investors based in North America which are currently investing in renewable energy and clean technology. North America-based investors in these industries have aggregate assets under management of more than $14tn, with an average current allocation of 4%, below their average target allocation of 6%. This suggests that more capital will flow into the infrastructure asset class as investors look to move towards their target allocations.
There is an assortment of different types of investors currently investing in environmental technology. Public and private pension funds account for 51% of investors in environmental sectors of infrastructure. Foundations follow with 14% of LPs, with both insurance companies and endowments accounting for 10% and 8% of investors in these sectors respectively.
North American LPs in renewable energy and clean technology sectors allocate capital in different ways. Twenty-two percent of firms invest capital through allocations to private equity, while 18% of firms have established separate allocations for infrastructure. Another 18% invest through real asset allocations, with 6% of LPs investing through a general alternative investment allocation.
The vast majority of environmental technology investors favour investing in infrastructure via unlisted infrastructure funds, with 94% preferring this route to market. Direct investments and listed funds are preferred by 14% and 9% of investors respectively. In terms of strategy, 98% of firms favour primary strategies, with debt and mezzanine strategies utilized by 23% of LPs. Fund of funds, and secondary strategies are each preferred by 4% of LPs. Over 85% of North America-focused LPs investing in renewable energy and clean technology sectors primarily invest in funds focused on North America, and 48% of these investors commit to funds targeting in Europe. Asia and Latin America follow behind with 19% and 13% of investors favouring these regions respectively.
Infrastructure as an asset class continues to be an important part of institutional investor portfolios. For instance, the $13bn public pension fund, Los Angeles City Employees’ Retirement System (LACERS) has recently made a $40mn commitment to Energy Capital Partners II, an unlisted vehicle investing in North American energy infrastructure and renewable energy.