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     Entrepreneur Kurra Bewarse Username: Entrepreneur Post Number: 3033 Registered: 05-2011 Posted From: 65.35.45.47 Rating: N/A |
Sovereign Wealth Funds Are Betting On Clean Tech. Why That’s Important. 1.Sovereign wealth funds are pouring cash into clean tech investments, a move that could provide the funding needed to accelerate the development of green technologies to combat climate change. 2.Managing more than $9 trillion of capital globally, sovereign wealth funds (SWFs) from China, Singapore, the Middle East, and Norway are ratcheting up their interest in the clean tech sector to tap into the global shift towards energy efficiency and lower carbon emissions. 3. “Sovereign Wealth Funds are spending a lot more time and money on the whole ESG impact and sustainability space. That’s a huge trend,” Makram Azar, founder and CEO of private-investment and advisory group Full Circle Capital, said. Dealmaking in the sector, which covers areas such as renewable power production and energy equipment, has been increasing during the year. In September, venture capital fund Emerald Technology Ventures secured $100 million in funding with Singapore’s state-backed fund Temasek as its cornerstone investor. 4. A month earlier, Masdar, a subsidiary of Abu Dhabi’s state fund Mubadala Investment, announced its second strategic investment in the U.S. in a deal with EDF Renewables North America that will see it acquire a 50% stake in a 1.6-gigawatt (GW) clean-energy portfolio. Abu Dhabi, like other Gulf oil producers, is seeking to reduce dependence on crude oil and diversify its energy mix. The focus on clean tech comes as the new Joe Biden administration in the U.S. is poised to roll-out an ambitious $2 trillion plan to reach net-zero domestic carbon emissions by 2050. 5. “This whole sector is set to benefit from the new U.S. administration and the stimulus package they are expected to pass through and clean tech will be a big focus. There aren’t a lot of sizeable opportunities because the companies are typically early stage and still relatively small,” Azar said. The International Renewable Agency (IRENA) recently called for big institutional investors such as SWFs and pension funds to help drive the investment levels needed to prevent “catastrophic” global warming. 6. In a report published on Nov. 19, IRENA said despite sitting on $87 trillion of assets globally, institutional investors accounted for just 2% of total direct investment in renewables in 2018. “The investment trend in renewable energy before COVID-19 was a positive one,” Francesco La Camera, IRENA’s director said. “But COVID-19 has shown us that much more effort is urgently needed to put us on a climate compatible pathway and help us recover better with a sustainable, resilient economy,” he added. For SWFs eager to invest in this space, there’s one hurdle: finding the targets. 7. Nicolai Tangen, chief executive of Norway’s $1.1 trillion fund, recently highlighted the difficulty in finding suitable unlisted renewable-energy projects to invest in due to the paucity of projects and strong competition for stakes in them. “In our experience so far, there are many investors looking for these investments and pricing is thus not always as attractive for us,” Tangen, told a parliamentary hearing on Oct. 30 which was reported by Reuters. “These investments are subject to the same risk and return requirements as the (fund’s) other investments. In the near term, finding projects that meet these requirements may be demanding.” 8. The urgent need to develop alternative green technologies has come into focus and that is being played out in the numbers. Environmental, social and governance (ESG) focused fund assets will account for more than 50% of total European mutual fund assets by 2025 at an annual growth rate of 28.8%, according to a recent report by consultancy PwC. The report—“2020 the growth opportunity of the century”—surveyed 300 institutional investors and 200 money managers with $14.3 trillion in assets under management and found that 77% plan to stop purchasing non-ESG products in the same year. 9. “This is a trend beyond Sovereign Wealth Funds. Look at Blackrock and many others who are allocating increasing amounts to ESG. The problem is that there is more capital chasing deals than deals to be had,” Azar said. Agricultural technology is another area fast attracting investment from SWFs at a time when the pandemic has heightened concerns about security of supply among big food importers. In particular, Middle Eastern countries that are exposed to import shortages and sharp price increases are investing in agricultural resources aimed at improving food security. 10.“Pre-pandemic the world was an open oyster where goods could be produced in China, assembled in the E.U. and sold in the U.S. Supply chains are now disrupted and supply-chain security is now at the forefront of thinking,” Azar noted, adding that countries with large populations to feed and desert terrain, for example, are more exposed and need solutions. On Nov. 11, Abu-Dhabi state-owned holding company ADQ struck a deal to buy a 45% stake in Louis Dreyfuss, one of the world’s biggest traders of grains, soyabeans, coffee and cotton. More recently, the Abu Dhabi Investment Office (ADIO) put $41 million into three technology firms aimed at boosting initiatives that address global food security challenges. |