Liquidity and cost key obstacles for renewable energy investments

Three quarters (75 per cent) of pension schemes and institutional investors view a lack of liquidity as the main barrier to investment in certain areas of the renewable energy sector, whilst 70 per cent are concerned about high costs, research from Downing LLP has revealed.

The survey showed that more than half (54 per cent) of respondents believes that there was not enough transparency in the renewable energy asset class, whilst nearly a third (31 per cent) thought there was a lack of track record or data in some cases.

Despite these concerns, the vast majority (94 per cent) of institutional investors expected the renewable energy sector to become more attractive in the next three years, with 45 per cent saying it will be much more attractive and 49 per cent saying slightly more attractive.

Nearly three quarters (71 per cent) of respondents thought that the macro-economic environment would be key to the sector becoming more attractive to investors, whilst half cited a predicted fall in income yields.

In addition to this, 61 per cent of professional investors expected regulatory changes to make the sector more appealing, while 46 per cent thought tougher regulation against oil and gas companies will push more investors to the renewable energy sector.

Commenting on the findings, Downing head of energy and infrastructure and Downing Renewables & Infrastructure Trust manager, Tom Williams, said: “Renewable energy is gaining more importance to institutional investors and wealth managers as they consider the climate change risk to their portfolio.

“However, the asset class needs to be more transparent, lower cost and be supported by appropriate regulation.”

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