“Net zero” transition presents £350 billion investment opportunity

Achieving the government’s “net zero” target by 2050 will require around £350 billion in investment in the energy sector, according to a new report.

The investment opportunity for asset owners equates to £12 billion a year over the next 30 years, according to LCP’s report, Aligning the Stars: Asset owners and energy investment toward Net Zero.

Existing renewable technologies such as wind and solar, alongside battery storage, will lead the way as well as creating new opportunities in innovative technologies such as hydrogen, the report said.

To increase the appeal of infrastructure assets, the energy sector will need to work with investors to bring forward enough of the right assets at the right risk/return level and quantity to interest global asset owners.

Investment levels have been held back by a lack of supply of assets at a suitable risk/return profile.

“Asset developers need to better understand that investors have a range of interests and move away from the assumption that ‘equity assets are the only game in town for investors’”, said the report, “given that bonds for instance, are by far the largest holding of corporate DB pension funds”.

Dan Mikulskis, investment partner at LCP, said: “We see something really big coming here – an infrastructure build out that few people have yet grasped the scale of. At the same time, we think the often-heard ‘unlocking private capital’ cliché frames the whole thing the wrong way.”

“We believe there is huge untapped investment potential if the energy industry thinks differently about the assets,” Mikulskis added.