Last August, insurer Legal & General said it would start making investments in clean energy using the remaining £8.5 billion ($12.1 billion; €10.8 billion) of its £15 billion UK infrastructure target.
At the time, a spokesperson said L&G had only about £100 million invested directly in solar. But in late February, L&G took a stake in NTR’s clean energy asset management business and is providing 47.5 percent of its €250 million onshore wind fund.
Head of clean energy John Bromley talks about what is next.
Q: How is L&G increasing its exposure to the sector in the UK?
JB: Our first significant direct equity investment into clean energy was with the NTR onshore wind platform. As well as investing in the fund there, we’ve taken a share in the manager. What’s important to us is to align interests and share strategic vision on not just the existing fund, but on the potential for future follow-on funds in the clean energy space.
The NTR platform is a good example [where] we identified a very good team, an experienced team. NTR has put together a fund to finance up to 270MW of generating assets. We’re at 47.5 percent of that fund, and that has already attracted other institutional players since December. It’s attracted Strathclyde Pension Fund and the Irish Strategic Investment Fund.
Q: Is L&G’s strategy to invest directly in clean energy assets?
JB: They are normally going to be direct investments, but I suppose it depends on the asset we are seeking. In general, we don’t intend to invest on an asset-by-asset basis by ourselves. For us, the way that we would go into the market is to partner with the best teams and then work with those teams to identify, put together and source the best assets and make those assets suitable for longer-term institutional type investors.
Q: Did COP21 change L&G’s approach to clean energy?
JB: It hasn’t changed our strategy. Clean energy is a sector that we were working on in the second half of last year, formulating our strategy and looking at how we might want to play and invest into that space in the UK. With that in mind, we’re very much focusing on the longer-term trends in energy post-COP21.
We welcome the outcome of COP21. I think it was a watershed moment. It’s a really important point and a key marker politically and it also sent out a strong and global message that there is a recognition that climate change is here. It’s having an effect. We need to act quickly to regulate it and bring it under control.
Q: Would growth in the clean energy industry continue as quickly without COP21?
JB: At a global level, one of the major challenges is the pace at which we can invest and transition the energy system. What COP21 might help with is the speed. I think that COP21 has the potential to add more conviction to those seeking those solutions. It helps raise the profile and might make more investors, consumers and politicians positively engage with what’s happening in the space. All of those things have the potential to help the market grow more quickly.
Q: What do you think COP21’s lasting effect will be?
JB: As the starting macro conclusion for our clean energy strategy, really what COP21 outcomes have done is they’ve reinforced the need to invest in the long term decarbonisation of our energy system – and this is an agenda and a trend that we recognise and identify with, that we were aligned to in our thinking. The outcome of COP21 has been another contextual pillar to support that thesis. Potentially, it does give the market more momentum, because it shows a broader global political consensus that this needs to happen and it will happen.