Appetite for renewables and energy transition remains in a higher-rates world

Appetite remains strong for renewables and energy transition investments in a higher interest rates world. That’s according to NTR CEO Rosheen McGuckian, speaking on a panel discussing financing the energy transition in a higher rates world at the Aurora Energy Research 2024 Spring Forum held in Oxford, widely considered to be one of the premium gatherings for the energy industry.

Pointing out that investors’ own stakeholders, for example pension members or third-generation members of a Family Office, expect their capital to address the climate emergency through purposeful capital, McGuckian said that even in a higher interest rate environment, appetite for the energy transition sector remains strong.

“While there are strategies out there such as forestry funds or energy efficiency retrofit funds, there is nothing like the scale of the opportunity set which renewables and the broader energy transition provides;” said McGuckian. “It’s a given that we need to deploy capital at three times’ the pace we are doing today into clean power and associated storage and grid for Europe to get anywhere near its 2030 targets.”

Meanwhile, returns have increased in the UK and Eurozone markets, reflecting the higher risk-free base rates currently being experienced. “We had previously seen a degree of gravitation towards PE style strategies dependent on a develop and sell construct;” added McGuckian. “However, over the past few quarters, we are seeing renewed interest by investors in cash-yielding strategies, particularly with the increased returns on offer, as at the end of the day, the core role being played by an investors’ infrastructure allocation, is to provide attractive risk-adjusted returns and to give back cash in a predictable manner.”