Downing LLP (Downing) has released new research that reveals an increase in focus on renewables from UK institutional investors and wealth managers. Downing offers both institutional and retail investors the opportunity to invest in renewable energy and other infrastructure in the UK and northern Europe.

The timing is appropriate, as this week the UK government’s long-awaited energy strategy is due to be released. It will outline the UK’s path to net zero by 2050, and is going to be closely studied, particularly due to contentious issues such as onshore wind, the expansion of nuclear and a possible return to fracking.

Downing surveyed the views of 100 UK institutional investors and wealth managers who collectively manage around £118 billion in AUM, during February 2022. The survey revealed that 80 percent increased their allocation to renewables over the previous 12 months, with 26 percent describing the increase as dramatic.

Nearly all (97 percent) of the respondents said they will increase their allocation to renewable energy in the next year. Downing’s research found all renewable energy sectors are expected to attract more investment, and when asked to select their top five reasons for this, three-quarters (74 percent) of professional investors surveyed cite the asset class’s recent strong performance, and the de-risking potential in volatile markets (69 percent).

Other attractions of investing in renewable energy included the diversification potential (67 percent); improved regulatory environment for investing in renewables (67 percent); a growing focus on decarbonisation from pension funds and wealth managers (62 percent); improved liquidity (60 percent); a good hedge against inflation (55 percent); and a greater pressure to invest in renewables (46 percent).

The sectors most likely to attract increased investment are as follows:

Henrik Dahlstrom, investment director at Downing Renewables & Infrastructure Trust, said: “As the renewables sector develops, it increasingly illustrates several features that investors find very attractive, especially in the current environment of low yields and rising inflation – both issues renewables can help investors to address.”

Mr Dahlstrom added: “Renewable energy is central to UK institutional investors and wealth managers as they set responsible and ESG investment strategies. We have long capitalised on the diversification benefits of investing in renewable energy and as inflation bites and market volatility continues, allocating to the asset class will become even more important.”