In 2005, former UN Secretary General Kofi Annan organized a consortium of the world’s largest institutional investors to create what is today known as the Principles for Responsible Investment (PRI). These principles provide an international framework for analyzing private equity investments, acknowledging that environmental, social and governance (ESG) issues can affect the performance of investment portfolios. The emergence of ESG-conscious investing has led to a greater focus on renewable energy investments in the last few years, instead of traditional non-renewables.
The demand for renewable investments has substantially surpassed the demand for non-renewables since 2017: the 2018 YTD figure for renewable energy fundraising has already surpassed – and is nearly double – last year’s total. As shown on Preqin’s online product, the total capital raised so far this year for investments targeting solely renewable energy stands at $35bn (as at September 2018) with last year closing on $19bn. While the number of funds closed dropped from 40 in 2017 to 24 in 2018 YTD, the average amount of capital raised per fund within the first nine months of the year has increased by 213%. The above chart shows a positive trend of funds for portfolios investing simultaneously in both renewables and non-renewables; though the capital raised by mixed and non-renewable fundraising has been declining, increased fundraising activity in the renewable sector suggests a shift towards more environmentally-conscious assets.
As highlighted in the Preqin Investor Update: Alternative Assets, H2 2018, 30% of investors plan to invest more capital in natural resources in the year ahead than they have in the past 12 months. The report further shows that the majority (62%) of investors in natural resources plan to make their next commitment in H2 2018; another 18% plan to invest in H1 2019 and 17% in H1 2020. With increasing investments focusing on the natural resources sector as a whole, there are promising levels of engagement towards the renewable energy industry specifically as a result.
For more fundraising statistics for renewable and non-renewable energy funds, please visit: www.preqin.com/research.