The Challenge of Institutional Investment in Renewable Energy
March 7, 2013
Institutional investors, which together manage assets of over $70 trillion, often have investment objectives that are aligned with the investment profile of infrastructure. At first glance, access to this large pool of capital and the alignment of objectives should help lower the costs of financing renewable energy. In this study, CPI finds that while these investors could supply a significant share of the total required investment, various factors limit the extent to which they can invest in a way that could lower the cost of financing renewable energy. Furthermore, financial regulation of institutional investors, regulation of energy markets, and renewable energy policy, often create additional obstacles to renewable energy investment.
Options for increasing institutional investor involvement include: removing energy and renewable energy policy barriers; improving investment practices at the institutional investors; modifying financial regulation and national pension policies; developing pooled investment vehicles for renewable energy projects; and, strengthening the role of potential corporate investors in renewable energy.