CASE STUDY

Renewable Energy Infrastructure

UK local government pension scheme | 2016

Engagement at a glance

The investor, a UK public pension fund, aimed to identify renewable energy-focused infrastructure funds and invest $80-100 million. Target return: 8-12%, including cash yield.

CLIENT-SPECIFIC CONCERNS

The investor had already explored this sector with their retained (large) investment consultant but was not satisfied with the result (shortage of viable choices). There was no existing exposure to or experience in infrastructure. ESG was high on the priority list: one third of the listed equity portfolio had already been moved to a low carbon benchmark. OECD-only exposure was preferred.




  • Our ESG philosophy is core to our investment approach. We are looking for infrastructure that makes a real, demonstrable impact.

Outcome

  • Casting the net wide was critical, given the limited nature of this universe and the investor’s previous negative experiences. 18 managers submitted proposals across various geographies and strategies, more than trebling the roster of funds that the investor could consider versus their previous independent search. Some are not large enough for consultant attention; others avoid ratings processes or RFPs since these have not been necessary for fundraising.

  • Early discussions and educational exchanges ensured that the client was comfortable with a significantly higher degree of greenfield exposure than one would find in conventional infrastructure funds – important, given the current nature of the renewable energy space.

  • Since the nature of the ESG impact was a priority, bfinance developed a bespoke tool permitting combination analysis of shortlisted funds in terms of the geographies and sectors where impact would be created. This not only provided clarity for decision-making but also helped the investor communicate the ESG impact to the organisation.

  • After detailed qualitative comparison and due diligence, narrowing the group to seven and then three, the client invested with two managers – one with a global OECD focus and the other concentrating on the US market. One had never previously participated in any consultant selection or RFP. bfinance continues to monitor results and progress.


Our specialist says

  • At the time of this search, the renewable energy infrastructure fund landscape has been undergoing considerable evolution, which investors must understand and take into account during implementation. The focus is shifting from brownfield towards greenfield, from core technologies (solar, wind) to more complex areas (eg biogas), and towards other parts of the value chain besides generation (storage, efficiency). Average leverage has also increased, and contractual cashflows tend to be lower.

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