Danish pension fund targets Asian clean energy bets
PensionDanmark, Denmark’s $51 billion pension fund, has identified clean energy solutions, including many in Asia, as its number one sustainability priority for 2025.
It is aiming to build on existing direct allocations in the region, which include wind and solar projects in India, South Korea, Vietnam and Taiwan.
“We are now heavily involved in green energy infrastructure development projects throughout the region," Jan Kæraa Rasmussen, head of ESG and sustainability at PensionDanmark in Copenhagen told AsianInvestor.
"It’s a very important market where there is a lot of future growth and [one] where a lot of the solutions and right decisions [on sustainability] are to be made. We want to be [major] impact investors in Asia.”
SUPERIOR RETURNS
Asia provides particularly attractive opportunities to the fund because of superior returns and the disproportionate dividends available in terms of decarbonisation, when measured against more developed markets, in particular.
PensionDanmark
“Some projects in Europe have been crowded and governments’ expectation of revenues from permits and concessions have not always been fully aligned with the realities of the electricity market.
"In parts of Asia the demand for secure, clean and affordable electricity is larger and thus more attractive for developers and investors,” Rasmussen said.
He pointed to the fund’s existing on- and offshore wind and solar investments in the region, but emphasised the need to consider individual projects and countries on their particular merits rather than applying a blanket approach.
“We want to have more of [these] on our books, [but] our assessment is very country and market specific. You cannot say there is a general playbook; you need to differentiate across the countries,” he said.
PensionDanmark made $5.6 billion of green investments globally in 2023, up from $5.1 billion in 2022.
He said the fund has so far committed more than $4 billion to renewable energy infrastructure globally.
“While most of it has been deployed, a substantial amount remains to be invested in actual assets in the near future,” he said, noting that it was therefore challenging to provide an exact figure for PensionDanmark’s engagement in Asia’s energy transition.
FUND INVESTING
Besides making direct investments in renewables infrastructure, most of the fund’s allocation to renewables, particularly in Asia, is made through Copenhagen Infrastructure Partners (CIP).
Allocations include CIP’s Flagship Funds, which focus on developed markets including Australia, Taiwan, Korea and Japan, and its Growth Markets Fund, which targets less-mature, high-growth markets, including India, Vietnam and the Philippines.
A significant part of CIP’s investment strategy involves developing greenfield renewable energy assets, often through joint ventures with local partners, before divesting them to other investors a few years after completion, Rasmussen said.
This maximises the impact of PensionDanmark’s allocations, he added.
“This allows CIP to finance and install more renewable energy to the grid.
"At the same time, we investors can harvest the development premiums and thus receive attractive returns. In all markets, different types of mature renewables assets are in scope, such as offshore wind, onshore wind, and solar."
In India, PensionDanmark currently has 10 projects generating a total of 1.3GW of capacity in solar and wind energy, either operating or under construction.
One of them is the Hatalageri onshore wind (300MW) in Karnataka. “With several more projects under development, the target is a total capacity of several GW in India,” he said.
In South Korea, the fund has invested in a 100MW offshore wind farm, currently under construction, off the coast of Shinan county.
“Additional projects are under consideration, including possibly floating offshore wind capacity,” he said.
The fund’s Taiwan investments have released 895MW of new offshore wind capacity through projects in Changfang and Xidao and Zhong Neng.
Beside carving out future investment opportunities in renewable energy, Rasmussen said PensionDanmark would increase its focus on biodiversity investments over the course of this and next year.
“We are also looking at how nature and biodiversity can be incorporated in impact, because I think in a very few years these will be just as important to investors as climate,” he said, noting that the fund had reported on its natural capital impact at the recent COP16 meeting in Colombia.
Jan Kæraa Rasmussen image credit:Ursula Bach/PensionDanmark