Mirova’s core infrastructure fund closing at €1.6 billion demonstrates that private equity investment in clean energy infrastructure is likely to play a vital role in the transition to green energy.
- Mirova has closed its fifth energy transition core infrastructure fund, Mirova Energy Transition 5 (MET 5), raising €1.6 billion over 18 months.
- The firm is capitalising on the need to accelerate the transition to green energy, further magnified by the global energy and climate crisis.
- Based on analysis by IRENA, energy transition investment will have to exceed current plans by 30%, to a total of $131 trillion by 2050 to align with a 1.5°C pathway.
The International Renewables Energy Agency (IRENA) sees energy transformation creating 122 million jobs by 2050, of which a third will be in renewable energy.
The MET 5 fund is the fifth of Mirova’s funds aimed at financing energy infrastructure focused on solar PV, wind, hydro, biomass and district heating. It is aligned with a 2°C pathway and lists maximising CO2 reductions and job creation as its aims.
Values driving Mirova’s core infrastructure fund
Mirova believes a combination of intentionality, additionality and measurability best defines an impact investing strategy. This is in line with the International Finance Corporation (IFC)’s definition, described as investments made with the intention of contributing to measurable social or political impact, and generating financial returns.
Besides its positioning and focus on investments, Mirova has also established its intentionality by placing contributions to the UN’s sustainable development goals (SDGs) at the core of its investment approach and has been certified as a B-Corp since 2020.
Additionality is created by going beyond investing in green projects like renewable energy infrastructure, according to Mirova. Active engagement with companies and projects on sustainable issues, and financing entities or sectors that are underfunded in society are also necessary.
Lastly, measurability is assessed by Mirova in terms of its contribution to SDGs, assessing carbon footprint, enhancing gender equality, measuring jobs creation, gigawatts of renewable generating power added, and improved land management metrics.
Track record and methodology provide investors with transparency
The team behind Mirova has been investing in renewable energy since 2002, when it financed the construction of wind power projects in France. It has since expanded its footprint across Europe and now aims to go global with its MET 5 fund.
Prior to raising the €1.6 billion for its latest core infrastructure fund, Mirova had €2.2 billion in assets under management invested in energy infrastructure, totalling 300 projects, equating to 5.8 GW of installed renewable energy capacity.
Of the €1.8 billion invested across 70 transactions, wind power has seen the most (49%) investment, followed by hydro (25%) and solar PV (18%). Other sectors include Biomass/biogas, battery storage and electric vehicle charging infrastructure.
Regionally, France has been the recipient of 35% of the firm’s investment, followed by Portugal (26%), the Nordics (14%) and Spain (11%). Mirova has also invested in projects in Belgium, Croatia, Poland and other eastern European countries.
The company has also published its engagement policy and transparency code on its website, which may serve to give investors further confidence in the firm’s sustainable finance methodology.
Opportunities, potential, need drive energy infrastructure investments
A study by the IEA and Imperial College London estimates $4 trillion in investments will be needed annually by 2030, to reach net zero emissions by 2050. It also estimates that 70% of clean energy investment will be needed by private developers and financiers.
A surge in green and sustainable debt issuance, amounting to over $1.6 trillion in 2021, double that of the previous year, driven by country and company net zero pledges, and government and financial system incentives to invest in clean energy.
Comparing the risks and returns of unlisted renewable assets globally between 2012 and 2021, the study found that global unlisted renewables had a higher annualised return than listed fossil fuel, and listed and unlisted infrastructure assets. They also outperformed the MSCI ACWI (NAS:ACQWI) ETF, a proxy for a broad range of listed equities.
The study suggests unlisted renewables may provide a higher diversification benefit to investment portfolios, finding that a negative correlation exists between the asset class and inflation and interest rates.
As the row over ESG investing continues, more investors are looking at impact investing as a means to satisfy their sustainable investment objectives. The transition to green and sustainable energy requires increased investment in renewable projects that can also provide a positive economic return. Investors like Mirova are demonstrating expertise in achieving financial returns, while also demonstrating their ability to address non-financial issues in selecting investment projects.