Earth Day in the Private Markets: 3 Pension Plans Making Strides in Renewable Investments

by Andrés Ramos, Content Marketing Specialist – eVestment Private Markets

Raising awareness

Each year on April 22 we celebrate Earth Day, a day that serves primarily to bring attention to the impact that humans have on our planet and the importance of environmental protection.

Reducing carbon emissions is a consistent theme of Earth Day and we want to take the opportunity this year to highlight three pension plans that are working to do just that by expanding their allocations to renewable energy. Investment in renewable energy can be made through the public equities, but most LPs invest in the sector via the private markets and their real assets or infrastructure portfolios.

Connecticut Retirement

In March 2021, Connecticut Retirement reported a $100 million allocation to the $3.4 billion BlackRock Global Renewable Power Fund III. According to the pension plan’s investment memoranda, “BlackRock’s [Global Renewable Power] platform is one of the largest renewables-only, private markets platforms in the world with $8.0 billion in assets under management.”

The commitment is part of Connecticut Retirement’s infrastructure and natural resources portfolio which, as of Q3 2020, had a current market value of 0.4% of the total portfolio against a target of 4.0%. The investment recommendation highlighted the compelling market opportunity in the renewables sector over the next thirty years so it would not be surprising to see Colorado Retirement make further commitments in the sector.

New Mexico SIC

Another institutional investor focusing in on renewable energy is New Mexico SIC. In November 2020, the pension plan released A Strategic Plan for Investment in New Mexico Renewable Energy, which outlined a roadmap for making targeted investments in the state’s renewable energy industry. One of the rationales stated in the plan was a report that by 2023, nearly 50% of New Mexico’s power generation will come from renewables. The goal of the program is to both drive compelling returns for the fund, but also to serve the people of New Mexico.

This is not the first time New Mexico SIC has invested meaningfully in their own state, the pension plan also committed heavily to a private credit strategy raised specifically to support cash-strapped New Mexico business during the pandemic.

Border to Coast

Also at the tail-end of 2020, UK-based pension scheme Border to Coast announced a £40 million direct investment in Sleaford Renewable Energy Plant, a straw-fired biomass power plant in Lincolnshire, England. According to the press release announcing the commitment, “Sleaford Renewable Energy Plant uses a blend of locally sourced straw and sustainable woodchip to generate renewable power and heat, capable of generating electricity for 65,000 homes, saving 50,000 tonnes of CO2 per annum.”

Sustainability is one of the central tenants of Border to Coast’s corporate and investment thinking and for the past two years they have published annual reports on responsible investing and stewardship. Border to Coast believes, “that businesses that are governed well and run in a sustainable way are more resilient, able to survive shocks and have the potential to provide better financial returns for investor.”

The investment is part of pension plan’s £1.4 billion infrastructure portfolio and was in fact a co-investment made in conjunction with energy manager Greencoat Capital.

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