Need renewables know-how? There’s a GP for that

When we spoke to Peter Dickson, one of the founding partners of London-based renewables fund manager Glennmont Partners in June 2020, it was just after the firm had realised its maiden 2009-vintage, the €437 million Clean Energy Fund I. At the time, he succinctly summarised the difference between the renewables market of yesteryear and our current reality.

“Now every institution has renewables in their portfolios,” he said. “It’s asset-backed, long-term and meets many ESG targets.”

These factors were probably in the minds of those at Nuveen, the investment manager which this week agreed a deal to buy 100 percent of Glennmont. Indeed, according to its statement, the deal will “meet increasing global demand for environmentally responsible investments that also aim to provide alternative sources of attractive returns”.

According to its website, Nuveen has invested $1.6 billion in renewable energy and climate change-related assets. No small change, by any means, but in a market requiring significant scale, the acquisition of Glennmont – which manages more than $2 billion of assets – materially changes Nuveen’s presence and ranking in this market.

Nuveen is not setting a trend here, with the inorganic growth route in the renewables market an increasingly popular one.

“I believe a number of market participants have not built an energy and infrastructure business before and now they’re building it and are catching up and that drives M&A,” Lars Meisinger, head of sales management and business development at Aquila Capital told us last year, when discussing Japanese financial services group Daiwa’s investment in the German renewables manager.

“When you do this organically, it will take time and be subject to the same risks that everyone else takes, while the external route of buying businesses is faster.”

Of course, this line of thinking is true in many sectors and asset classes. However, the renewables market brings certain unique nuances to the inorganic growth route. While, as Dickson noted, “every institution has renewables in their portfolio”, only a handful of managers can point to managing dedicated funds such as Glennmont’s maiden effort – a now-realised, sizeable vehicle which lived through various stages of the sector’s development.

Dedicated renewables funds and the managers that run them, for all their popularity and clear benefits, remain at a stage where only a few can point to a demonstrable track record. In Glennmont, Nuveen has found such a platform to grow this side of its business.

With that in mind, it certainly would not be a surprise to see similar moves over the next few years, as more GPs prove the return benefits of specialist strategies and investment houses like Nuveen catch up on their exposure to the sector.

Indeed, as the infrastructure asset class grows on its current trajectory, do not be surprised if we will be having a similar conversation in five to 10 years about digital infrastructure funds.