In the current macro environment, clean energy managers with local presence, experience, and technical asset knowledge are best positioned to capitalize upon Europe’s increased demand for clean energy project financing, says Nuveen Infrastructure
Discuss the history of your strategy and how you view the current opportunity set for clean energy investment.
We have been investing in renewable energy for over 15 years and were one of the first fund managers to invest institutional capital into the space in Europe. So we have seen how the market has evolved across investment cycles and with the growing awareness of climate change. Today the opportunity in renewables is more relevant than ever. The European Commission has proposed that 45% of the EU’s energy mix should come from renewables by 2030, which is up from 40% just over a year ago. In order to help reach that target, the EU has stated that an extra €210bn will need to be invested over the next five years.
How is your team organized across equity and credit?
We have a collaborative approach, and the model is that of an owner/operator, which is our mindset for all investments, including credit. It starts with a dedicated energy transition credit team, which sources investments, executes due diligence, and structures transactions. We also leverage the rest of the platform, including the expertise of our equity investment and asset management team members, comprised of over 60 investment specialists and engineers. Additionally, we work with the broader Nuveen team, a much larger platform that has expertise in credit and also in, for example, ESG, legal, and finance. Given our deep experience as a clean energy specialist that invests across both equity and debt and has a dedicated team of asset managers and engineers, we believe we are uniquely positioned to evaluate the current investment environment.
On the debt side, what returns do you aim to achieve and what are the benefits of investing in the strategy?
We look to achieve equity-like returns but with a risk level driven by primary and secondary senior project finance loans. A predominant piece of the return stream is stable, recurring income, and the strategy aims to deliver absolute return for investors. Other positive considerations for the current market environment include the floating rate structure of underlying loans, and the inelastic demand associated with clean energy infrastructure projects.
How is your credit strategy typically viewed within an investor’s portfolio?
We have found our strategy can fit into different buckets. Investors may wish to invest for ESG purposes, and we fit into the ESG and impact part of their portfolio. Others are pure credit investors that seek attractive risk-adjusted returns and are agnostic about the underlying sector. Some may add us to an infrastructure portfolio that is branching out from equity into debt, or have made their first foray into energy and now want to expand into the energy transition. Green energy credit can be a flexible, attractive opportunity for investors that wish to achieve stable, diversified returns, while also achieving sustainability objectives.
About
Scott Lawrence is a Partner at Glennmont Partners, a Nuveen company. Nuveen Infrastructure offers access to a globally diversified renewable energy platform through Glennmont Partners, its clean energy investment specialist. Nuveen Infrastructure currently manages more than $5bn in AUM across clean energy, telecommunications, transportation, agribusiness, and social infrastructure.
www.nuveen.com/infrastructure