Asset Owner Insights: Renewables and clean energy dominate APAC infrastructure investment
AsianInvestor covered 69 asset owners across Asia Pacific in its latest Asian Owner Insights (AOI) survey in April and May. The surveyed firms had a total AUM of $7.5 trillion as of the end of September 2021.
The respondents’ asset allocations showed a higher exposure to infrastructure assets compared to the respondents in previous Asset Owner Insights survey. As of the end of March 2022 (Q1), their total exposure to infrastructure was 5.6% of their assets under management (AUM), up from 2.4% in data from the previous survey by end September 2022.
Renewables and other clean energy and sustainability-linked assets come out as the preferred infrastructure investments among APAC asset owners, though they continue to have a significant amount of interest in traditional utilities, along with ports and logistics.
QIC
Ross Israel, head of global infrastructure at QIC, a Queensland government-owned investment company, said his team's three key investment themes point to the greater allocation to sustainability-linked infrastructure investment.
“The three thematics currently focusing us are decarbonisation, decentralisation — which very much plays into the energy transition with the aspects of renewables storage and micro grids — and then deglobalisation,” Israel told AsianInvestor.
The deglobalisation theme focuses on logistics assets, which Israel explained is about the realignment and onshoring of some of the supply chains with increased geopolitical risks emerging.
“In Europe, these geopolitical risks are around the Ukraine/Russia conflict, while in APAC they are around China, and the perimeter there with respect to sensitivities emerging with the US,” he said.
North America is once again the region of choice for asset owners, although Asia also has growing appeal for infrastructure investing, according to the latest AOI survey.
“The recent passing of the US Inflation Reduction Act (IRA) is very positive for renewables. It will see the extension of tax credits for wind and solar and new tax credits for energy storage, low carbon transportation fuels and carbon capture. These will support the energy transition in the US,” said Israel.
“It does look like there is a very strong tailwind emerging for the energy transition in the US, which is naturally attracting investors.”
According to Israel, APAC asset owners are investing more in sustainable energy-linked infrastructure assets as they look for growth and become more concerned with environmental, social and governance (ESG) principles
“Energy transition infrastructure is probably one of the largest sustainable-aligned sub-sectors, and has a huge forward capital expenditure profile,” said Israel,“It represents a a multi-decade opportunity, a once in a generational investment in infrastructure.”
“If you marry that with electrification of transport, which is clearly going to have tail winds from the IRA, the changes could drive greater than $3 trillion in cumulative capital investment in new US energy infrastructure over the next decade or more. From that point of view, I would say the opportunity is truly significant.”
The survey was conducted by Asset Owner Insights, AsianInvestor's proprietary data platform. Read more from previous survey coverage:
Asset Owner Insights: PE falls out of favour in alternative asset allocation
Asset Owner Insights: Asian investors are expanding equity exposure