Up to £350bn of investible assets could be found within the energy sector over the next 30 years as investment in opportunities to decarbonise the economy by 2050 increases, Lane Clark & Peacock (LCP) finds.
The consultancy's research Aligning the Stars: Asset owners and energy investment toward net zero was released today (2 March) ahead of tomorrow's Budget, and considers the scale of investment opportunities for private capital in helping the government to achieve its 2050 net-zero economy target.
LCP said untapped private capital within the energy sector could generate £12bn per year, every year until 2050. This includes investments in existing renewable technologies, such as wind and solar, along with new opportunities in more innovative technologies like hydrogen.
While a "business-as-usual" scenario would only see asset owners extending their infrastructure investments over the next decade to £70bn, upping exposure alongside global asset owners and the government means more than £125bn could be invested over the next decade.
A continuation of the investment pattern would then total £350bn by 2050, the analysis showed.
LCP investment partner Dan Mikulskis said: "We think there is huge untapped investment potential if the energy industry thinks differently about the assets. At the same time, the often heard ‘unlocking private capital' cliché we think frames the whole thing the wrong way."
He added the doorway between private investment and infrastructure "has been wide open for the last decade" with increased investment in infrastructure assets like offshore wind, biomass, and solar.
The consultancy said the energy sector would need to work with investors to bring forward enough of the right assets at the right risk/return levels and quantity to interest global asset owners.
"Net zero will require more than a one size fits all approach. There is a broad diversification in both the technologies and assets that will be required, from existing technologies such as wind and solar that will need to be deployed more widely, to emerging technologies such as hydrogen and carbon capture that are still in their infancy," said head of market insight Kyle Martin.
"The changes needed to reach net zero span much further than just the existing energy market and will also rely on large social and lifestyle changes. This means there will be investment opportunities across a range of energy infrastructure projects."
Chancellor Rishi Sunak is expected to outline more green investment plans in the Budget tomorrow in line with the £12bn government stimulus plan announced last November. It came as the government launched its ‘10 Point Plan' for what it called a ‘Green Industrial Revolution' to mark the 12-month countdown to the UK hosting COP26.
ESG Watch: Warning to pension schemes; MSCI's call to asset managers; Russell Investments outlines 2050 net-zero goal
Professional Pensions rounds up some of the latest ESG and climate news from across the industry.
Net zero, engagement, and ESG fund trends: Incisive Media unveils Sustainable Investment Festival programme
Professional Pensions' parent Incisive Media is pleased to announce the programme for its inaugural Sustainable Investment Festival, which will run online from 22 to 25 June, with pensions and financial inclusion minister Guy Opperman among the keynote...
As deficits skyrocket, bond investors have an opportunity to engage with governments to try to ensure they tackle climate change, argues Thomas Dillon.
Schemes need to obtain emissions data to measure their carbon footprint, but this process comes with challenges. Stephanie Baxter explores how to overcome them and why schemes need to look beyond emissions
The Environment Agency Pension Fund (EAPF) will cut its carbon emissions by 50% from a 2010 baseline level by the end of this decade on its trajectory to net zero.