U.K.'s Renewable Investment Shortfall Discussed by Phoenix's Greg Scott
Phoenix Group, a leading UK savings and retirement business with £290bn of assets under administration, is actively pursuing investments in renewable infrastructure, recognizing the need for government support in grid connectivity to find investable opportunities.
In a move to accelerate progress towards decarbonization, the UK energy regulator, Ofgem, has announced a faster way to connect new power projects to the grid. This development is welcomed by Phoenix, as it opens up possibilities for future investments into grids that meet the company's internal economic hurdles.
Phoenix has exposure to early-stage climate solutions in its equity investments, targeting core and core+ infrastructure. The company is committed to the Mansion House Compact, pledging to invest at least 5% in unlisted equities by 2030.
However, investing in emerging renewable infrastructure assets like green hydrogen and carbon capture presents several challenges for Phoenix in its illiquid portfolio. These include coordination of diverse funding sources, policy and regulatory uncertainty, technology and infrastructure integration, long investment horizons and illiquidity, stakeholder engagement and social acceptance, and navigating nascent markets and technologies.
To mitigate these challenges, Phoenix has partnered with experienced advisors and relies on policy clarity and risk-sharing mechanisms. The company has also set up a joint venture with Schroders, Future Growth Capital, which includes a UK infrastructure strategy.
Despite a lack of investible projects in the pipeline in the past years, Phoenix remains committed to the UK as its core investment market in the infrastructure space. Since 2020, the company has allocated £10bn to the illiquid credit space, with £1.2bn invested in infrastructure assets, of which £450m is in renewables. Regarding its illiquid credit infrastructure assets, Phoenix aims for 50% to 70% of asset originations to be in sustainable or transition assets.
Greg Scott, senior investment manager at Phoenix, will be speaking at the Renewable Infrastructure Summit on 26 February, sharing insights on the company's renewable energy investments and strategies.
Phoenix is also invested in gas distribution networks, recognizing their importance for the flow of hydrogen or other low-carbon gases. The UK government is backing renewables, removing barriers to offshore wind development and supporting sustainable alternatives like sustainable aviation fuel.
Phoenix Group faces a significant challenge: achieving net zero emissions for both operations and the investment portfolio by 2050. However, with its commitment to renewable energy and strategic partnerships, the company is well-positioned to navigate the complex landscape of emerging renewable infrastructure assets.
[1]: Source: Phoenix Group's 2021 Sustainability Report [3]: Source: Climate Policy Initiative's UK Infrastructure 2021 report [5]: Source: International Energy Agency's Green Hydrogen: A New Frontier report
Phoenix Group, with its commitment to renewable energy and strategic partnerships, is not only investing in renewable infrastructure but also has exposure to early-stage climate solutions in its equity investments, targeting a 5% investment in unlisted equities related to environmental science by 2030. The company is also looking to invest in finance solutions, such as those involving green hydrogen and carbon capture, despite the challenges posed by illiquidity, policy uncertainties, technology integration, and navigating nascent markets.
