Institutions see the appeal in solar energy, with a long term and hefty yield drawing many to the table

Pension funds are locked into an immense challenge. On the one hand they are facing immense liabilities in the form of ageing workforces that are moving away from defined benefit schemes to defined contribution (DC).

Yet in a world of low interest rates and pitiful returns, they are having to move further down the credit curve in search of yield.

Solar farms offer a combination of factors that are drawing in institutional cash in the billions. From an ESG perspective the benefits of investing in technology that is helping to mitigate the impact of climate change is obvious.

From an investment perspective the appeal of long term and stable energy versus stranded assets is another core appeal.

Coal and oil and gas risk becoming obsolete in a world in which the world favours measures to limit the release of greenhouse gases into the atmosphere.

Meanwhile the yield on offer from solar developments entices many.

Major investors in solar energy include the Canada Pension Plan Investment Board, the Norwegian pension government fund and the Swedish National Pension Fund and the John Lewis Partnership.

Capital injections from pension funds is helping to galvanise India’s burgeoning renewable energy industry, which is receiving government support as the world’s second largest nation by population looks to take on the success of China, which has both an enormous customer base and the position of the world’s manufacturing hub for solar panels.

Pension funds are going to play a key role in driving the installed capacity of renewable energy projects. With the capital and the demand from Northern European investors in particular to focus on renewable energy, the future looks bright for those looking to tap cash from some of the world’s biggest institutions.