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BlackRock Raises Largest Renewable Fund in U.K.

Rising interest in renewables from U.K. pension funds is part of a wider trend underscored by the Paris Agreement.

  • Joe McGrath

BlackRock has raised more than £1.1 billion ($1.4 billion) for its Renewable Income U.K. fund, making it Britain’s largest investment pool targeting renewable power.

The firm said Wednesday it attracted $612 million of new commitments for the fund, seeing “strong demand” from U.K. pensions turning to infrastructure and renewable energy assets to meet long-dated liabilities.

Asset managers are witnessing increased global demand for sustainable energy investments after the 2015 Paris Agreement underscored the commitment of major nations to the development of renewables and related technology, according to a Preqin report last month. The financial data provider cited the BBC Pension Trust as an investor in the BlackRock fund, with similar pools attracting investors including South Korea’s National Pension Service and the Church Pension Group in New York.

“There is more interest around climate change” strategies, said Andy Howard, head of sustainable research at Schroders, a London-based asset manager. “It is becoming clear that, unlike a few years ago, renewables are economically viable in their own right, without the requirement for political support.”

Renewable energy power has become one of the most “active sectors for deal flow in the growing infrastructure asset class,” BlackRock said, noting that its renewable fund has already invested more than £600 million in 40 wind and solar projects in the U.K. The New York-based firm, which is the world’s largest asset manager, found that 63 percent of U.K. investors that it polled in November for its 2017 Global Rebalancing Survey planned to increase exposure to real assets.

Beyond diversification, renewable funds can help offset challenges that arise in portfolios from more traditional energy investments, according Schroders’s Howard. Renewables-focused funds raised about $5 billion this year through April, exceeding fundraising for conventional energy, according to Preqin.

An April research report commissioned by the United Nations Environment Programme’s economy division found that institutional investors made a record $2.8 billion of direct equity commitments to European renewable energy projects in 2016, while the issuance of green bonds to finance environmental projects, including renewable energy, rose 99 percent to $95.1 billion last year.

Commenting on record acquisition activity in the clean power sector, Udo Steffens, president of the Frankfurt School of Finance and Management, said in the UN report that “investor hunger for existing wind and solar farms is a strong signal for the world to move to renewables.”