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We are also seeing investors that are looking to unlisted infra- structure, which is a relatively small part of their investment portfolio, to deliver a disproportionate share of their carbon emissions reduction target.


Simon, infrastructure is vital for economic growth, but how important is infrastructure when it comes to building a sustaina- ble world? Simon Whistler: It is fundamental. Ultimately, we are not going to achieve the energy transition without massive investment in infrastructure across the world. You cannot underplay that part of the conversation.


It is easy to state that investing in renewable energy or battery storage are sustainable or impact investments, but it’s also important how you manage the assets.


There is a lot more to sustainability than simply owning or investing in a wind farm.


There are also supply chains, how you manage communities and so on. It is good that more money is flowing into those assets, but how those assets are managed and looking further down the chain are fundamental parts of it as well.


So, there is more to the energy transition than wind farms and solar parks? Whistler: The industry needs a clearer definition of sustaina- ble infrastructure. There are lots of infrastructure funds say- ing that they are sustainable, but everyone will have different definitions of what can go into them. Renewable energy is part of that, like battery storage and smart meters, and digi- tal infrastructure – there are lots of things that people are looking at.


We have seen returns in the renewable space come down to levels where the underlying risk of owning a wind farm can make it uneconomical in some cases.


Katya Romashkan, Local Pensions Partnership Investments


With so much political will behind renewable sources of energy, and with investors building sustainable portfolios, why isn’t renewable energy booming? Ebner: It would be booming if governments accelerated the per- mitting process and force grid operators to offer more connec- tion capacity. There are also some issues in the supply chain. For example, it can be problematic to procure wind turbines for a fair price from China and ship them to Europe. Finally, interest rates have risen. We are often asked if energy transition assets can cope with the interest rate rises we have seen during the past month.


These are the reasons why renewables are not booming as well as they could be. Nevertheless, efforts on the political side to overcome these issues will drive a massive increase in sustain- able infrastructure in the months and years to come. Dusch: It is an interesting point about interest rates. When we launched our infrastructure debt offering in 2014, generating between 4% and 6% for senior investment-grade was the pre- vailing yield. Then rates became negative and generating a 2.5% yield almost made you a hero. To a certain degree, the interest rates we observe are back to historic levels of 10 years ago and we capture it in our infrastructure debt investments. But renewable energy prices have also risen meaning that equity-holders of such assets can probably afford the higher cost of debt as they also capture higher inflation.


December – January 2023 portfolio institutional roundtable: Infrastructure 11


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