Sovereign investors in Asia Pacific see their direct investment in alternative and renewable energy assets contributing strongly to future growth. Wind power, in particular, has gained considerably as a credible alternative source to fossil fuels, and regional investors such as GIC, Future Fund and New Zealand Super are accelerating their activities in this space
On Wednesday (March 30), NZ Super announced a new joint venture with Copenhagen Infrastructure Partners (CIP), to explore the potential for large-scale offshore wind energy in the Taranaki region of New Zealand.
This follows the $150 million NZ Super Fund committed to CIP's Energy Transition Fund in 2021. The CIP fund is focused on developing industrial-scale sustainable energy infrastructure, known broadly as Power-to-X (power-to-hydrogen, power-to-ammonia and power-to-methanol).
The New Zealand offshore wind venture plans for an initial one gigawatt development that would represent over 11% of New Zealand’s current electricity demand capacity, powering over 650,000 homes (NZ’s current population is approximately five million).
The partners believe the project could later expand to 2GW.
In Asia Pacific, CIP already has offshore wind developments in Japan, Korea, Australia, mainland China and Taiwan. The offshore wind feasibility work in NZ is expected to take two years. The partners recognise that the success of the project in Taranaki will require partnering with local iwi (Māori tribes) and businesses.
In particular, they will need to ensure that the project does not adversely affect marine life and biodiversity in the area. Taranaki is also the only area of New Zealand where oil and gas have been found in sufficient quantities to be economically extracted, so the local community is well-versed in the environmental and energy issues.
“The climate crisis is driving a global shift in how countries produce energy," NZ Super Fund CEO Matt Whineray said in an official statement. "We are focused on opportunities that allow us to apply our long-term investment capital to support this shift and the fund’s own public commitment to being net zero by 2050,”
Should the project proceed, and subject to relevant regulatory approvals, CIP and NZ Super Fund could deliver power by the end of the decade, a big step towards New Zealand’s ambitions for 100% renewable energy by 2030.
Speaking at last week’s Responsible Asset Owners online event, Kristian Fok, CIO of Australian super fund Cbus, said many of the best opportunities for large funds looking at infrastructure investments lie in the renewable energy space.
He said regulators will look favourably on investments that can demonstrate a positive environmental impact.
Australia’s Future Fund also has offshore wind exposure, via Global Infrastructure Partners, whose wind power assets include Vena Energy, the largest independent power producer with solar, wind and battery storage assets in the Asia Pacific region.
The Australian sovereign fund’s 2021 investment in Tilt Renewables - a partnership with QIC and AGL Energy - added to the fund’s existing Australian renewable energy assets and increased its exposure to around A$1 billion, according to a spokesperson for the fund.
Singapore’s GIC is also committed to promoting renewable energy transitions through its Sustainable Investment Fund, which was launched in July 2020. It is a dedicated portfolio allowing GIC to add value through a more dedicated and detailed engagement with companies on aspects of sustainability that are material to their long-term risk-reward prospects.
Allied to this, GIC is driving a new investor-led initiative - the Asian Utilities Engagement Program (AUEP) - to engage on sustainable energy transitions with major utility companies that are not within the Climate Action 100+ focus list.
There are five focus companies of the initiative at launch: China Resources Power Holdings, CLP Holdings, Chubu Electric Power Co., Electric Power Development Co. (J-Power) and Tenaga Nasional Berhad.
The AUEP tracks how each company is performing. The lead investor for each focus company is required to share high-level information on each company’s progress via the Asia Investor Group on Climate Change (AIGCC). This includes observed areas of improvement and updated priorities for the next phase of engagement.
Investor engagement with Asian electric utilities will play a key role in addressing climate risk, as the sector contributes approximately 23% of global greenhouse gas emissions and represents more than $200 billion of market capitalisation on Asian stock markets, according to GIC's latest annual report.
Unisuper CIO John Pearce agrees that engagement is an important part of getting fossil fuel industries to look for technologies that can help them transition to a low carbon world.
The super fund has no specific exposure to offshore wind at this time, but for its members, Unisuper invests in renewable energy, energy efficiency, water and waste treatment and green buildings. "We think there are opportunities in decarbonising across sectors," Pearce told AsianInvestor.
"This is through our global listed equities option, that invests in electric vehicle manufacturers, solar panel manufacturers, public transportation, water utilities, waste management and green real estate."