europe : promising trends in unlisted green funds · europe : promising trends in unlisted green...

EuropE :PROMISING TRENDS

IN UNLISTEDGREEN FUNDSThE GREEN FUND MaRkET IN

INFRaSTRUcTURE, PRIvaTE EqUITy, PRIvaTE DEbT, REaL ESTaTE

aND FOREST

MaRch2019

with the support of

2 Europe:promisingtrendsinunlistedgreenfunds•January2019•NovethicinpartnershipwithADEME

kEy POINTS ....................................................................................................................................... p 4

ThE EUROPEaN UNLISTED GREEN FUNDS ................................................................ p 6

Are green unlisted funds meeting financing needs?.............................................................. p 8

Main trends from unlisted green funds ...................................................................................... p9Fund classification and definition of the study panel ................................................................................... p9Main characteristics of the unlisted green funds market ..........................................................................p10Data comparison of green funds for listed assets and unlisted assets .....................................................p13

Conclusion ............................................................................................................................................. p14

DETaILED aNaLySISThE ENvIRONMENTaL qUaLITIES OF GREEN FUNDS ...................................................................p15Large European public investors are the top clients .................................................................................p15Investment themes dominated by renewable energy ................................................................................p15Unlisted green funds more or less diversified according to country .........................................................p16In France, the TEEC label guarantees environmental quality ......................................................................p16Emerging demand for greater transparency and impact measurement ....................................................p18Analysis by sector and green asset technology .........................................................................................p19Focus: emerging technologies and themes ...............................................................................................p23Investor demand is becoming clearer .......................................................................................................p23

DaTa cOLLEcTION METhODOLOGy ...............................................................................p25

SUMMaRy

Europe:promisingtrendsinunlistedgreenfunds•January2019•NovethicinpartnershipwithADEME 3

T heEuropeanUnionhasassigneditselfambitiousenergyandclimateobjectives and an action plan for sustainable finance. However,there are very few figures on financial products that target both

objectives.Forthisreason,Novethic,withthesupportofADEME,hasevaluated in 2017 the listed green funds market in Europe beforeanalysingtheunlistedgreenfundsmarket,inthisstudy.

This work is all themore useful given that an increasing number ofinstitutional investors are looking to diversify their investments inunlisted funds like infrastructure and real estate. Some of them areinterested in green funds, and more specifically, in the renewableenergyandenergyefficiencysectors.

Identifyingandqualifyingtheenvironmentalnatureofthesefundsisachallengebecausethereareveryfewavailabledatabasesandtargetedfundspublishverylittlereporting,withthelegaldocumentandfinancialinformationbeingmostoftenreservedforinvestors.

Theobjectiveofthisstudyistoevaluatetheamountsinvestedinunlistedgreenassetsacrossvariousfunds,whethertheyclearlydisplayagreenpositionornot,thusallowingustoevaluatethecharacteristicsandtheopportunities related to thismodeof greenfinancing. In France, theTEEC(“EnergyandEcologicalTransitionfortheClimate”)label,auditedbyNovethic,guaranteestheenvironmentalqualityoffunds,andtoday,unlistedfinancialproductscomprisemorethanhalfofthefundswithaTEEClabel.

ackNOWLEDGEMENTSNovethicthanksADEMEforitssupportandconstructivefeedbackaswellasalltheprofessionalsthatagreedtosharetheirtimeandknowledgeontheunlistedassetsmarket.

ADEME : GuilainCals-EconomistfortheEconomyandProspectiveService PatrickJolivet-HeadoftheEconomyandProspectiveService

France : PhilippeGarrelandMariannedesRoseaux(Acofi),OliviaYedikardachian(CaissedesDépôts),IsabelleCombarelandRenaudSerre(SWENCapitalPartners), SergeSavasta(OmnesCapital),CédricLacaze(RGreen),BenjaminPaternot(BPIFrance).

Royaume-Uni : IanBerry(AvivaInvestors),JoostBergsmaandAlfredPerry(GlennmontPartners), NicholasBurlington(ImpaxAssetManagement).

Pays-Bas : JosienPiek,SanderPaulVonTangerenandRickWalters(GRESB),ElsAnkum-GriffioenetDaanvanderWerf(TriodosIM).

Luxembourg : AurélienRoelens(CubeInfrastructureManagers).

Finlande : VesaSyrjäläinen(VARMAMutualPensionInsuranceCompany).

Danemark : ErikEliasson(DanskeBankWealthManagement).


TOP 10 asset management companies (in €M)

TOP 3 of most committed countries

Source:Novethic

Source:Novethic

Source:Novethic

Macquarie Infrastructure and Real Assets

BlackRock

Copenhagen Infrastructure Partners (CIP)

First State Investments

PERIAL Asset Management

Greencoat Capital

Cube Infrastructure Managers

NextEnergy Capital

InfraRed Capital Partners

Marguerite Adviser

TOTAL

4 0003 4023 1862 1001 9731 9601 8301 4741 4411 410

22 776

UNITED

kINGDOM

82funds

€ 25,8bn

FRaNcE

54funds

€ 9bn

GERMaNy

22funds

€ 3,5bn

2

1

3

UNLISTED GREEN FUNDS IN EUROPE

223 funds

57,6 bn assets

6,5%of European unlisted assets

kEy POINTS


Thestudyidentifies223 environmental fundsinEuropethattotal€57.6 billion in unlisted green assets.Thesevariousfunds(infrastructure,investmentcapital,realestate, forests…)havebeenquantifiedforthefirsttimethroughthe lensofboth environment and Europe. Most funds are fairly recent and testify to theinfluenceandmomentuminitiatedbytheParisAgreement.Subsequently,apeakof€12billioninfundraisingacross35fundswasrecordedin2016.

Green funds represent less than 10% of unlisted European fundsbuttheirshare remainsmore important than thatof listedgreen funds (less than1%ofEuropeanfunds).Raisingonaverage€5billionperyear,unlistedEuropeangreenfundsmeetasmallfractionoftheadditionalinvestmentneedsfortheenergyandecological transition.TheEuropeanCommissionestimatestheseneedsatmorethan€180billionperyearby2030.

Funds focused on renewable energy take the lion’s sharewithmorethan€26 billion in invested assets across 122 funds.Thedetailedanalysisofunlistedfundsshowsthatthistypeoffundhasthetendencytobeinvestedbyupto100%inthesespecificgreentechnologies.

�Assets�are�becoming�more�diversified.Ononehand,specialisedfundscanbefoundinemergingtechnologyordomainslikesmartcities,whichareallseekinghigherreturnstoreflecttheriskstakenbyinvestingininnovativeprojects.Ontheotherhand,onecanalsofindfundsofferinglowerreturnsthatputgreateremphasisonrefinancingexistingassets inverymatureproduction,suchasonshorewindfarms.Thissecondcategoryrepresentsmorethanhalfofthestudypanel.

�Despite�growing� interest,�demand� for�unlisted�green�financing� remains�weak on the investor side.Theattractivenessofproductsdedicatedtorenewableenergiesisbasedmoreontheireconomicandfinancialperformance.Subscriberstotheseunlistedfundsarenotverydemandingonthequalityofenvironmental reporting,whetheritisinrelationtoavoidedemissionsorinstalledcapacity.OnlytheEIBhasthesekindsofrequirements,aswellasahandfulofhighlycommittedclimateinvestors.

Country leaders in the management of unlisted green funds are the United Kingdom, remotely followed by France and even further, Germany. Thesecountriesalsoconcentratethemajorityofrenewableenergyandenergyefficiencyprojectsfinanced.ItisnotnecessarilythedominantoperatingmethodinNordiccountries,whichareadvancingrapidlyintheirenergytransition,butratherinthecontextofdirectfinancing.


ThE EUROPEaN UNLISTED GREEN FUNDS

The volume of unlisted funds remainsmodestcomparedtoEuropeanlistedfunds(€11.867billion),butmomentumisgrowing.AccordingtoPreqin,thismarketrepresentsconsolidatedfundraisingof€53billioninthefirst quarter of 2018, i.e. 30% of the totalamountraised in2017(€184billion),whichindicatesanaccelerationintheirattractivity.

1Source:PreqinMarketsinFocus:AlternativeAssetsinEurope,June2018.Capitalinvestmentfundsincludehereprivateequityandprivatedebt.

2Principlesforresponsibleinvestment,launchedbytheUnitedNationsin2006,thatencourageinvestorstointegrateESGdimensionsintoportfoliomanagement

Themarketforunlistedfundsissmallandreservedforinstitutionalinvestors,givenitscharacteristicsmarkedbyriskandilliquidity.AccordingtodatafromPreqin,adatasolutionservicespecialisinginalternativemanagement,theEu-ropeanmarketrepresented€882billionasofDecember31,2017whencombiningallthefunds.Thisincludedthoseinvestedintangibleassetsorsimplyengagedinpendinginvestments.

The growing importance of ESG criteria in unlisted asset managementInitiallydevelopedforlistedmarkets,theanalysisofcompaniesaswellasothertypesofassetsbasedonenviron-mental,socialandgovernance(ESG)criteriaisstartingtogainground.Theriseinclimaterisks,aswellasthethreatsemanatingfromtherejectionofinfrastructureprojectsbylocalcommunities,havefavouredthedevelopmentofanESGanalysisadaptedtounlistedmarkets.

AccordingtofiguresprovidedbythePrinciplesforResponsibleInvestment(PRI)²basedontheannualsurveyofthegroup’s1600signatories,morethan¾oftheinvestmentmanagerscurrentlyactiveinprivateequityorinfrastructurehavereportedadoptingcertainresponsibleinvestmentpractices.

Volume breakdown by asset class1 (in € bn)

10

615

126

131

Capitalinvestmentfunds

Infrastructurefunds

Realestatefunds

“Naturalresources”funds(includingforests)


Proportion of management companies having directly invested in a given asset class and having declared piloted certain responsible investment practices in the relevant asset class

UnlistedfundsareprimarilybasedonanESGanalysisconductedonacase-by-casebasis,directlyseekinginformationfromcompaniesorprojectleaders.Itisthenusedtoencourageimprovedpractices,mostoftenintheformofsidelettersthatsupplementthelegalandfinancialrequirementsoftherelationshipbetweenprojectleaderandinvestor.

Infrastructure funds are going greenAccordingtoaglobalIPERealAssetssurvey3oninfrastructureinvestors,59%considerrenewableenergiesasthebestinvestmentopportunityin2017andin2018.Thisisfollowedbywater(34%).Moreover,theNovethicstudy4 on green investmentbytopFrenchinstitutionalinvestorsconfirmsthistrendinFrance.Whiletheoverallproportionoftheirgreenassetsdoesnotexceed1.07%,itexceeds25%forinfrastructureinvestments.Thispromiseofdevelopment,iscompletedbyanotherpromise,whichisthatofthe€56billionthatwasalreadyraisedbytheendof2017butnotyetinvested.Therefore,thiscouldpossiblybededicatedtogreenassets.

Accordingtoseveralstudies(ADEME20185,Lazardbank6,etc.),themostmaturerenewableenergiesareparticularlyattractiveinvestmentsastheyarecompetitive.Thecostofproducingsolarenergyisdown86%over8yearsand67%forwindenergy.ThisglobalphenomenonisinevitableaccordingtoBloombergNewEnergyFinance,whichestimatesthattheshareofrenewableenergieswillgofrom38%to66%ofthetotalinstalledcapacitybetween2015and2040.

3InstitutionalInfrastructureSurvey20184Source:Novethic,October2018173ShadesofReportingSeason25ADEME,Trajectoriesfortheevolutionofelectricitymixfor2020-2030,December20186Lazard’slevelizedcostofenergyanalysis,2017

Source:PRIBlueprint2017


ANNUAL INVESTMENT NEEDS FOR SUSTAINABLE DEVELOPMENT IN THE EU (€ BN)

7“RestoringEUcompetitiveness”,2016(fortheperiodextendingfrom2014to2030)

are green unlisted funds meeting financing needs?With€57.6billion,theEuropeangreenfundmarketrepresents6.5%oftotalunlistedfunds.ThisremainsverylittlecomparedtothefinancingneededtoachieveEurope’senergyandecologicaltransition.

TheobjectivesoftheEuropeanUnionwilldevelopnewmarkets.

By2030,itseeks:

Toreducegreenhouseemissionsby40%(vs.1990)

Tosettheshareofrenewableenergiestoatleast32%ofEUenergyconsumption

Toincreaseenergyefficiencybyatleast30%

Toreduceitscountries’dependenceonfossilfuelsandenergyimports

AccordingtoEIBdata7,theannualfinancingneedsevaluatedtoachievetheseobjectivesarecloseto€300billionforthetransport,watertreatment,wasteandenergysectorsalone.

Tooperateatlevel,itisnecessarytocombinecontributionsfrompublicbanksandprivatefinancing.Fundsdedicatedtoenergytransitionoftenbenefitfromthistypeofco-investmentbut,asitstandscurrently,theamountsmobilisedbyunlistedgreenfunds,muchlikelistedfunds,donotmeettheseneeds.TheintroductionofaEuropeanclassificationsystemandnewtoolssuchasanEcolabelshouldfacilitatethisdevelopment.

TRANSPORT

WATER&WASTE

ENERGY

80 80

48 90

130 100

Current Required

Source:EuropeanCommissionActionPlan-FinancingSustainableGrowth,March2018


Main trends from unlisted green fundsTobuildadatabaseof223unlistedgreenfundsonaEuropeanscale,theNovethicteamcarriedoutimportantdatacollectionandanalysisworkinconjunctionwithapproximatelyfifteeninterviewswithvariousprofessionalsfromtheunlistedsphere(assetmanagers,publicandprivateinstitutionalinvestors).

Themaindifficultyoftheexercisewaslinkedtothescarcityofpublicinformationanditslackofhomogeneity.

Fund classification and definition of the study panel These223fundsarethoseforwhichthenumberoffinancedgreenassets(projectsorcompanies)totalsatleast50%ofassets.Theseinclude:

203fundsclearlyshowingtheirenvironmentalpositioningininvestmentwordingorstrategy

20fundsforwhichmorethanhalfoffinancedassetsaregreen,withnospecificmentionintheirwordingand/orpublicdocumentation.

Inordertojudgethe«green»qualityofanasset,Novethicreliedontheclassificationcreatedforlistedfunds,basedon five green investment “themes”.

These«themes»correspondtotheprimarydirectionofthefunds’investmentstrategy.Inmoredetail,theyincludeoneormoregreen«sectors».ThethematicbreakdownmadebyNovethicqualifiesthesefunds(seepage19):

Renewable energy: this is a simple theme, since it concerns only the renewable energy sector, alltechnologiescombined.

Climate/Energy transition:thisthemebringstogethertherenewableenergysectoraswellastheenergyefficiency,greenbuilding,transportandcarboncaptureandstorage(stillatanearlystage)sectors.

Water:thewaterthemeherecorrespondstothewatertreatmentsector.

Environment:thisthemecoversthesectorsofpreviouslymentionedthemesaswellasthesustainableagriculture,forestry,wasteandpollutioncontrol,andsoilrehabilitationsectors.

Sustainable:thisthemeisthebroadest.Thefundsclassifiedinthisthemeinvestinoneormoregreensectorsmentionedaboveaswellasinsectorswithaclearlymarkedsocialdimension(forexample,health,education,etc.).

SustainableEnvironmentClimate/Energy Transition

Renewableenergy Water

Source:Novethic


THE PRONOUNCED FOCUS OF GREEN FUNDS

Novethicalsosoughttoassessthegreenintensityoffunds.Thus,ofthe223greenfunds:

159fundscanbedescribedas full green inthesensethat100%oftheassetstheyholdaregreen. Itcanbeobservedthatunlistedfundshaveanaveragegreenallocationthatismuchmorestringentthanthatoflistedfunds.Forexample,ofthe159unlistedfullgreenfunds,117investexclusivelyintherenewableenergysector.

25fundscanbecharacterisedashavingagreen focus: theproportionofgreeninvestments(innumberoflines)isbetween50%and99%oftheassetportfolio. Itshouldbenotedthatonlysixfundsinthiscategoryarelistedasgreeninthewordingoftheirnameorintheirinvestmentstrategy(includingtwoTEEC-labelledfunds):UBSCleanEnergyInfrastructureSwitzerland,ASNGroenprojectenfonds,FCPIEcotechnologies,CityofTomorrow,SCORInfrastructureLoansIII(TEEClabel),andBRIDGEIVSeniorEnergyTransition(TEEClabel).

39fundscouldnotqualifyunderagreennesscriterionsincetheyhavenotyetstartedinvesting(6funds)ortoolittleinformationisavailableontheassetsheldintheportfolio.

Main characteristics of the unlisted green funds market

The renewable energy theme dominates the panel as itrepresentshalfofthefundsandassetsundermanagement(AuMs)(€27billion).Thisisareversetrendtothatoflistedfunds where the share of renewable energies is muchlowerthanthatofwaterandenvironmentfunds.Logically,these last two themesare the least represented for theunlistedfundspanel,withatotalamountof1%and13%respectively.

The studyalsomakes it possible todetermine trends inthevarioustechnologiesinvestedintherenewableenergysector,butalsoinenergyefficiency,andmorebroadly,intheenvironmentaltheme.

VOLUME BREAkDOWN By THEME

GREEN INTENSITy OF FUNDS

Theme

122

47

23

30

1

223

Renewable energy

Climate/Energy transition

Sustainable

Environment

Water

TOTaL

Numberof funds

Source:Novethic

Source:Novethic

Source:Novethic

Renewableenergy46%

Water1%Environment

13%

Greenfocus12%

Fullgreen73%

Notidentified15%

Sustainable14%

Climate25%


Amongthe25green focusfunds,amajorityoffundshaveashareofgreenprojectscomprisedbetween50%and80%foreachfund(numberofgreeninvestmentscomparedtothetotalnumberofthefund’sinvestments).

INFRASTRUCTURES, PRIVATE EQUITy, … WHICH ASSET CLASSES DOMINATE?

Thepredominanceofinfrastructurefundsisobserved,eventhoughthelinebetweenthemandconventionalprivateequityisnotalwayseasytodecipher.Forexample,fundsmanagedbyCubeInfrastructureManagers,ImpaxAMandOmnesCapitalmixthetwostrategies.Theirgoalisprimarilytobepresentinthecapitalofdevelopersorpromotersbehindgreeninfrastructureprojects.Thisfacilitatestheiraccesstoprojectpoolsandallowsthemtoactivelyparticipateintheorganicgrowthofcompaniesandassistthemintheirdevelopment,particularlyintheirinternalESGbestpractices.

Thereisagreaterdegreeofgreenintensityforfundsinvestinginrealassetssuchasinfrastructure,realestateandforestassets,whosecontributiontotheenergyandecologicaltransitionismuchmoreobviousthanforfundsfinancingunlistedcompanies,lesslikelytoofferverifiableenvironmentalfeatures.Infact,unlistedcompanieswhoseactivitycanbedescribedas100%greenremainrare.Thus,outof159fullgreenfunds,almostall(94%)arerealassetsfunds.

Regardingrealestate,manyassetmanagershighlightenergyperformancemonitor ing for assets andimprovementobjectives.Thus,inFrance,accordingtotheOID(FrenchObservatoryonSustainableRealEstate)Barometer20178,«halfoftherealestatelistedcompanieshavepublictargetstoreduceGHGemissions»,andthese«voluntaryreducedenergyconsumptionobjectiveshavebeenestablishedfor2020asbeingbetween-20%and-40%andbetween-30%and-70%for2030».Thatsaid,therearefewfundswithminimumenvironmentalperformancetargetsforselectedassetsorspecificperformance improvement targets,whichclearlyqualifythemasgreenfunds.Fundsmeetingthistypeofrequirementonlyrepresent4%ofthevolumes.

DISTRIBUTION OF THE NUMBER OF FUNDS ACCORDING TO THEIR PROPORTION OF GREEN PROjECTS

BREAkDOWN By NUMBER OF FUNDS PER ASSET CLASS

Source:Novethic

Source:Novethic

PrivateDebt2%

Infrastructure76%

Forests2%Realestate4%

Infrastructure/PE4%

PrivateEquity12%

8OIDBarometer(ObservatoryofSustainableRealEstate)onthe“EnergyandEnvironmentalPerformanceofCommercialBuildings,”Edition2017

8

1

9

750%-60%

60%-70%

70%-80%

90%-99%


MARkET EVOLUTION OVER THE PAST 10 yEARS

Ingeneral,thelifecycleofaprivateequityorinfrastructurefundrevolvesaroundseveralkeyperiods:

SubscriptionorFundraising:thefundmayannounceoneormorespecificperiodsduringwhichitispossibletosubscribeintothefund.

Investment:periodduringwhichthemanagementcompanylooksforcompaniesor«target»projectsinwhichtoinvest.Itthencallsforfundsfromlimitedpartners(institutionalinvestors)whocameforwardduringthesubscriptionperiod.

Detention:oncetheinvestmentshavebeenmade,themanagementcompanymonitorsthemforavariableperiodrangingfrom5years(forprivateequityfunds)to12years(forinfrastructurefunds).

Divestment:proposalandexecutionofassetsales.

Thepaceforunlistedfundraisinggeneratessomeyear-to-yearvolatility.However,twostrongtrendsstandout:aminibubblein2008-alsonotedonlistedgreenfunds-andarevivalsince2014(yearlyassetvolumeraisedexceeding€6.6billion).TheadoptionoftheParisAgreementinDecember2015hadarippleeffectin2016,bothintermsofamountsraised(€12billion)andnumberoffundshavingcompletedtheirfinalroundoffundraising(35funds).Sincethen,fundclosingshavecontinuedtoincrease,despiteaslowdownintheamountsraised.

Inall,thesizeofthegreenfundmarketforunlistedassetsreached€57.6billion,nearlytwiceasmuch(1.8precisely)asthetotalAuMforlistedEuropeangreenfunds.

EVOLUTION OF THE NUMBER OF FUNDS AND AMOUNTS RAISED

Amountraisedbynewfunds(€bn)

Amountraisedinpreviousyears(€bn)

Numberoffundshavingclosedfundraisingperyear

2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 20183

12

5 48

13 12

1721

35 34

43

3 2 1 23 2

7

6

12

8

8

6 7 9 12 1421

27

3947

Source:Novethic


MAIN ASSET MANAGEMENT COMPANIES HOLDING UNLISTED GREEN FUNDS

Data comparison of green funds for listed assets and unlisted assets

Therankingisdominatedbythemajorplayers in infrastructurefinancing:Macquarie,BlackRockandCopenhagenInfrastructurePartners.TherearefewprivateequitymarketplayerswithgreenorsustainableinvestmentexpertisesuchasDemeter,GlennmontPartners...Today,unlistedprojectsarethereforeverypopular,andthecompetitionispotentiallyfierceforsmallmanagementcompanies,whicharealsofacinglargeindustrialgroupslikeTotalwhocanbuyandabsorbsmallerindustrialprojectpromoters.

Top 10 Asset Manager

Macquarie Infrastructure and Real Assets

BlackRock

Copenhagen Infrastructure Partners (CIP)

First State Investments

PERIAL Asset Management

Greencoat Capital

Cube Infrastructure Managers

NextEnergy Capital

InfraRed Capital Partners

Marguerite Adviser

TOTaL

Number of funds

1

4

3

1

1

4

2

3

2

2

23

Volume of green funds (€M)

4000

3402

3186

2100

1973

1960

1830

1474

1441

1410

22 776

ThEME

Available panel

Renewable energy

Climate/Energy transition

Water

Environment

Sustainable

Number of funds AUM (€ M)*

176***

8

22

18

74

26

340

3 993

11 301

10 590

3 108

UNLISTED GREEN aSSETS

32 250Number of funds AUM (€ M)**

223

122

47

1

30

23

26 715

14 671

478

7 753

7 933

LISTED GREEN aSSETS

57 550

*Lastfiguresfortheamountsraisedreportedon14/12/2018**On31/12/2017***Thelowcarbonthemeiscomprisedof28funds(€2.72bn),thiscategorywasnotconsideredinthepresentstudy

Source:Novethic

Source:Novethic


cONcLUSION

EUROPEAN UNLISTED GREEN FUNDS: A PROMISING NICHE THAT REMAINS INSUFFICIENT

ThestudyconductedbyNovethic,withthesupportofADEME,has identifiedadrive inunlistedgreenfundswhichhavebeengrowingrapidlysince2014.Themarkethasmorethan220fundswithdiversifiedprofiles,beitfortheproposedassetclasses,theinvestedgreentechnologiesorthefinancialprofiles(risk/returnprofileforfunds),totalingnearly€60billion.

ThismarketisaveryusefulsourceofgreenfinancingforEuropeatatimewhenpublicsupportmeasuresforrenewableenergyinEuropearedryingup(reductionofsubsidiesandpurchasetariffs)andthenumberofprivatecontractsforelectricityresaleareincreasing.Thiscontextexacerbatescompetitionforthemostattractiveprojectsanddrivesmanagementcompaniestoincreasinglyinnovate.

However,itisnecessarytoqualifythisinformationbecausethefinancingneedsof a low-carbon economy remain significant. Some experts point out the lackof creativity withinmanagement teams, which does not allow them to definetrulydisruptivesolutionstoaddressthisclimateemergency.Itthereforeseemsessential todevotemoreresourcesandtimetothedevelopmentof intelligentsolutionsandtotheidentificationofprojectsthatarefinanceableandexploitable,combinedwithenvironmentalreportingtoassesstheimpactofsuchfinancing.

Themassivemobilisationoffinancialflowsforthebenefitofthegreeneconomyisyettocome.Ontheonehand,itisnecessarytobetteridentifyprojectsofallkindswithinvariousEuropeancountriesand,ontheotherhand,beabletoevaluatetheirenvironmentalqualities.TheimplementationoftheEuropeanCommission’sSustainableFinanceActionPlanisexpectedtobringnewdevelopmentstothisemergingmarket.Thepublicationofastandardizedclassificationsystemofgreenactivitieswillprobablymakeiteasiertodirectfinancialflowstowardstheenergyand ecological transition. It is also necessary for investors to strengthen theirgreenfinancingstrategiestomakegreenassetsafullcategoryintheirallocationstrategy,andnotjustasimplediversificationnichelabeledas“green”.

Attheinternationallevel,initiativesaremultiplyingtostimulategreenfinancing.Thelatestinitiativewascreatedinmid-January2019.TheClimate Finance Leadership Initiative (CFLI), co-founded by Michael Bloomberg and executives from AXA,HSBC,MacquarieGoldmanSachs,Enel,andthe JapanesesovereignfundGPIF,hassetthegoalofincreasingthevolumeofclimatechange-orientedfundingtoscalerapidlytothelevelofneed,especiallyfundinggearedtowardinfrastructureinemergingcountries.«Themorewecanaccelerateprojectinvestment,themorewecancreate jobsand reduce thehealthandeconomic risksassociatedwithclimatechange,»statedthepressreleasefortheinitiative’slaunch.


DETaILED aNaLySISThe environmental qualities of green funds Large European public investors are the top clientsTheNovethicstudywasabletopointoutthekeyroleofsponsorssuchastheEIB,whichinvestedin40fundsidentifiedinthisstudy,withanaverageholdingof€57millionandalmostaquarteroftheholdingsinunlistedgreeninvestments.InFrance,majorpublicactorsincludingCaissedesDépôtsgroup,BPIFrance,ADEMEandthePensionReserveFund,participatein21ofthesefunds.Ingeneral,58oftheidentifiedfundsincludeparticipationfromoneorseveralpublicEuropeanfinancialinstitutions,suchasKfWGermany,FMOintheNetherlandsandCassadiDepositiinItaly.

Investment themes dominated by renewable energy

RENEWABLE ENERGyThe122fundsunderthethemeofrenewableenergyrepresent,withnearly€27billion,almosthalfoftheamountraisedbyunlistedgreenfunds(47%).Theyareveryhomogeneousintheircomposition:117areclassifiedasfullgreenand2areclassifiedasgreenfocus.

CLIMATE/ENERGy TRANSITIONThe 47 Climate/Energy Transition themed funds total €14.7 billion and represent 1/4 of the total market. Thecharacteristicsofthesefundsaremorevaried.Theproportionofgreenassetsremainsabove50%eveniftheyincludecertainnon-greeninvestments(e.g.roadconcessionsandnaturalgasutilities).AlsoincludedisthePFO2,arealestatefundfromtheFrenchPerialAM.

ENVIRONMENT AND WATERThe31fundsundertheenvironmentorwaterthemesrepresentatotalvolumeof€8.2billion,or14%ofthetotalmarket,whilethisthemelargelydominatestheofferoflistedfunds.ThelargestistheMacquarieEuropeanInfrastructureFund5,whichalonetotals€4billion.Thereisonlyonefunddedicatedtowater:DalmoreInfrastructureInvestment.

SUSTAINABLE23fundscombinegreeninvestmentswithothersocialvalue-addedthemes.Theytotal€7.9billionandallareclassifiedasgreenfocusbecauseofthevarietyofthethemesintheirportfolios.Socialvalueisunderstoodinabroadsensebyfundmanagers.Thus,beyondtraditionalsocialinfrastructuresuchasschools,hospitalsorcourts,certainplayerssuchasCubeInfrastructureManagersorZencapAMclassifyfiberopticfacilities,telecommunications,orevenroadsunderthiscategory.

Average size of funds (€ M)*Amount raised (€ M)*

309

Themes

TOTaL

Renewable energy

Climate/Energy Transition

Water

Environment

Sustainable

Number of funds

223

122

47

23

30

1

259

358

467

323

478

26 715

14 671

7933

7 753

478

57 550*latestreportedamountasof14/12/2018

Source:Novethic


Unlisted green funds more or less diversified according to country

In France, the TEEC label guarantees environmental qualityLaunched at the end of 2015, the Energy and Ecological Transition for the Climate (TEEC) label guarantees thetransparencyandqualityoftheenvironmentalcharacteristicsofthefinancialproductstowhichitisgranted.Assuch,thelabelisofinteresttoinstitutionalinvestorsaspartoftheirgreenfinancingstrategies.

Based on country ofmanagement, the UnitedKingdom (UK) comes out first, even if theinvestmentprojectsarenotnecessarily locatedintheUK.Franceisinsecondpositioninnumberoffunds,withlowerassetvolumes.

British and German funds are mainly focusedon renewable energy infrastructure, but thebreakdownbythemeismorebalancedforFrenchfunds.FrenchfundsareevenlydistributedacrossRenewable Energy, Environment (includingprivateequity fundsmanagedbyDemeterandsoilrehabilitationfundsmanagedbyBrownfieldsGestion), Climate and Sustainable themes. Inaddition,Frenchfundsaccountforthemajorityofgreenprivateequityfunds(9intotal,including4under sustainable theme fundsand2underclimatethemefunds).

ThesignificantpositionofIrelandandDenmarkin the asset class ranking is due to twomajoractors:BlackRock (93%ofAuMs in Ireland)andCIP (97% of AuMs in Denmark). The modestrankingoftheNetherlandsandNordiccountriesislinkedtothefactthatinvestmentsbylargeinstitutionalinvestorsinunlistedgreenassetsaremadedirectlyorviainternationalfunds.Thus,accordingtothelistofthetop100investorsininfrastructurepublishedattheendof2018byIPE,4areDutch,foratotalinfrastructureofapproximately€22billion,and12areNordic,forapproximately€21billion.Inbothcases,itisdifficulttodeterminethepercentageofgreenfundsrepresented.

Number of funds* Average size of funds (€ M)Volumes Managed (€ M)

14 212

Themes

TOTaL

TOTaL 223 57 550

Renewable energy


Environment

Sustainable

7

5

1

1

207

241

100

216

1 446

1 207

100

216

2 969*On14/12/2018

Country of management company

25 888

9 008

3 548

1 187

2 287

4 679

1 871

76

1 501

3 652

3 272

583

82

54

22

12

9

9

9

6

5

5

5

5

United KingdomFranceGermanyFinlandNetherlandsLuxembourgSwitzerlandSpainItalyIrelandDenmarkOthers

Number of funds Size of funds(€ M)

Source:Novethic

Source:Novethic


Nineassetmanagementcompanies(eightinFranceandoneintheUnitedKingdom)sharethemanagementofthe14TEEC-certifiedunlistedfundsinEurope.Intotal,thesefundsrepresent€3billioninamountsraised.

Since2014,therehasbeenverysignificantgrowthinthenumberofTEEC-certifiedfundsthatclosedtheirfundraisingeachyear.Therehasbeenatwentyfoldincreaseintheamountraised.

Environmental Indicators

8

4

3

2

Tonnes of CO2 avoided

Installed capacity

Annual production displayed by the equivalent in homes powered

Energy savings attributable to energy efficiency

Number of funds

Most TEEC-certified funds are infrastructurefunds under the Climate/Energy Transitionor Renewable Energy themes. Only onefund is classified as Sustainable giventhe social dimension attributed to someof its investments in telecommunicationinfrastructures (fibernetwork,data centers).The Paris Fonds Vert private equity fundmanaged by Demeter Partners falls undertheEnvironmenttheme,particularlybecauseofitsambitiontosupportSMEsintheareaofinnovativewaste.

MEASURING IMPACT

TEEC-certified funds must produce at least one environmental performance indicator.Certainfundsreferencesocialindicators.Forexample,DemeterPartnersorAcofiGestionpublishinformationonthenumberofjobscreated,theamountofthecompany’sportfolioinvestedinresearch&developmentandinnovation,andthenumberofcompaniesrecyclingtheirwaste.

SECTOR ANALySIS AND FOCUS ON RENEWABLE ENERGy FOR TEEC FUNDS

AmoredetailedinvestmentanalysisshowsthatthemostrepresentedsectorisbyfarthatofRenewableEnergywith11fundsinvested,followedbyEnergyEfficiency(with4fundsinvestinginstorageandcogeneration)andtransportation(1fundinvestedinfreightsystems).Intotal,thefunds’investmentamountsinrenewableenergytechnologiestotal€1billion.

VOLUME BREAkDOWN By THEME

EVOLUTION OF AMOUNTS RAISED By TEEC-CERTIFIED FUNDS

Source:Novethic

Source:Novethic

Renewableenergy


Sustainable

Amountsraisedbynewfunds(€M)

Amountinpreviousyears(€M)

Numberoffunds

50%

42%

8%

14

9

531

2018

2,9 bn

201720162015Launch of TEEC label

2014

1 173

936

860307553

24760 60

1 796

Source:Novethic


Emerging demand for greater transparency and impact measurementInstitutionalinvestorswithresponsibleinvestmentpoliciesareincreasinglyturningtounlistedfundsandthereforewanttoseeaminimumstandardfortransparencyanduseofindicatorsinthemanagementreportsaddressedtothem,startingwiththeEuropeanInvestmentBank(EIB).Since2017,SWENCapitalPartnershasintroducedaclimatemeetingclausetoits«primary»operations,whichrequiresaninventoryfromeachcontractedmanagementcompanyontheclimatestrategyofassetmanagers,18monthsaftertheinitialinvestment.Thefirstmeetings,scheduledforMarch2019,willhelpgaugethelevelofcommitmentandthequalityoftheeffortsmade.

TheCarbonInitiative2020,supportedbythePRIandFranceInvest,alsoinvitescapitalinvestmentplayerstoimplementresponsibleandtransparentmanagementoftheCO2emissionsofcompaniesinwhichtheyareshareholders.Theroughly20signatoriesarecommittedtomeasuringthecarbonfootprintofcompanyportfoliosandtopublishingareportin2020.

Non-listed fund managers nevertheless point to the difficulty of implementing the standardised measuresrecommendedbythePRI,GRESBortheTCFD,giventheweaknatureofthedataavailabletothem.ThisiswhytheACT(AssessingLowCarbonTransition)methodologydevelopedbyADEMEisavaluabletool.CreatedinconjunctionwiththeCDP9,itaimstoassesstheabilityofcompanies,particularlyunlistedSMEs,tocopewiththetransitiontoalow-carboneconomyviasectoralbenchmark.Thismethodologywaslaunchedin2017andtestedwithover60companiesofall sizes. It integrates thenatureofacompany’scommitments, themeans implemented,andtheirclimateriskmanagementandtransparencyintermsofcarbonperformance,allforthepurposeofcontinuousimprovement.

At thisstage,climateremainsthebestaddressedtheme,whilereferencestotheSustainableDevelopmentGoals(SDGs)remainextremelyrare.

PRIVATE EQUITy FUNDS ALSO PARTICIPATE IN THE ENERGy TRANSITION

Private equity funds tend to arrange their unlisted company portfolios thematically to meet new demands fortraceability.

Forexample,Bpifrancecontributed€7.7billiontoenergyandenvironmentaltransitionprojectsthroughitsinvestmentandfinancingactivitieswithcompaniesinFrancebetween2013and2018.AccordingtoPhilippeKunter,DirectorofCorporateSocialResponsibility&SustainableDevelopmentatBpifrance, «wehaveobservedaverystrongrise inimportanceofthesesubjects.Theinvestmentgrowthwas+20%between2016and2017».

9Internationalnon-profitorganisationthatholdstheworld’slargestdatabaseontheenvironmentalperformanceofcitiesandbusinesses.


Analysis by sector and green asset technologyThispartofthestudyisdevotedtotheanalysisofportfoliocompositionforprojectsorcompanies,brokendownby«sector».Thismakesitpossibletodeterminethegreentechnologiesactuallyfinanced.

Renewable energy andenergy efficiencyaccountforthemajorityofinvestments(seefollowingpages).

Concerningtransportation,€380millionwasinvestedinrailinfrastructureandfreightsystemsbyaBritishEquitixfund in theUnitedKingdomandbyaScor InvestmentPartners fund invested in France. Therearealso3 fundsfinancingsolutions related to water treatment and management, totalling€1billion:wastewatertreatment inScotland(JohnLaingEnvironmentalAssetsGroup),constructionoftheLondon«supersewer»(DalmoreInfrastructureInvestment) and investment in a French private company (Frasie) specialising in water treatment and industrialwastewater(QuaeroEuropeanInfrastructureFund).

Waste management and pollution control are targeted by 7 funds managed in France, the United kingdom and Luxembourg,eitherbyfinancingrealassetssuchastheprocessing,recycling,transformationandrecoveryofwaste(notablytheEastLondonAuthorityWasteprojectsorWakefieldResidualWasteTreatmentFacility),orthroughinvestmentsinunlistedcompanieslikeLactips(aFrenchcompanybasedintheLoireregionwhichhasdevelopedthermoplasticgranulesbasedonbiodegradablemilkproteins).

Renewable Energy

Energy Efficiency

Carbon capture & storage

Green building

Transportation

Water treatment

Agriculture/forests

Waste/pollution control

Soil rehabilitation

Rail transportation and freight systems Public transportation systems Eco mobility

Waste management Pollution control

Storage Cogeneration District heating (and cooling) networks Smart grid Transmission and

distributionLighting

efficiencyServices related to

the energy transition41

1

8

12

3

7

7

5

SECTORS & TECHNOLOGIESNumber of funds investing in each

sector

Biofuel Hydropower Geothermal Waste to energy Thermal solar PV solar Marine Onshore

windOffshore

windBiomass Small Hydropower

156

Source:Novethic


TheFrenchBrownfieldsManagementandtheSwissGinkgoAdvisorhavedevelopedfundsentirelydedicatedtosoil rehabilitation and remediation,primarilyinBelgiumandFrance,whichtotal€629millioninraisedfunds.

Finnishmanagement companies standoutwith four funds specialising insustainable forest management andplanningoftimberextractionrates,mainlyinthewoodlandsofNorthernEuropeandEasternEurope.

Lastly,threeFrenchfundsandoneDutchfundhavemadegreen real estatetheirspecialty.TheConstructionEnergiePlusfund(€120M)fromtheFrenchOmnesCapital,launchedundertheimpetusofPROBTP,isdedicatedtofinancingconstructionorrenovationprojectsforpublicandprivatebuildingswithhighenergyandenvironmentalperformancein largeFrenchcities.AnotherexampleistheDutchTriodosVastgoedfondswhichholds18officebuildings intheNetherlands.ItistheonlyfundtodatethatshowsallassetsasbeingCO2neutral.

Onlyonepanelfundinvestsinanemergingcarbon capture and storagesolution,namelytheFCPIEcotechnologies,managed by Bpifrance Investissement and financed under the French government’s Investments for the FutureProgram (PIA).However, this sector remainsunattractive to the funds inourpanel: a largemajorityofmanagersbelievethatasufficientlymatureandeconomicallyviabletechnologydoesnotcurrentlyexist.

FOCUS ON RENEWABLE ENERGy TECHNOLOGIES

TheRenewableEnergythemeisinitselfadiversifiedsector,towhichdifferenttechnologiescorrespond.

NUMBER OF FUNDS INVESTED By RENEWABLE ENERGy TECHNOLOGy

Onshorewind

Photovoltaicsolar

Biomass

Waste-to-energy

Offshorewind

Smallhydropower

Biofuel

Geothermal

Thermalsolar

Marine

69

66

23

20

15

84 2 17

Source:Novethic


Thedetailed study,basedona limited sampleof27 funds,displays the specificbreakdownby volumeof assetsinvestedinthevariousrenewableenergytechnologies,foratotalof€5.1billion.

Thesetechnologiesnowconsidered«de-risked»,arethusattractingincreasinginterestfrominstitutionalinvestmentteamsthatareno longerhesitatingtofinancethistypeof infrastructuredirectly.Thefall inthepriceofmaterialscombinedwiththeexpertiseacquiredaroundassociatedriskswiththeseprojects(construction,obtainingpermits,etc.),aswellastheemergenceofhigher-qualitywindorsolarstudies,haveturnedthemintoinvestmentsthatareso«easy»thattheybecomeboringformanagementcompaniesseekingriskandhighreturns.Companiesaremovingtowardsmore«smart»solutions,especiallystoragesolutionsandsmartcitiesviaunlistedcompanyinvestments.

Technologiesin biomass, waste-to-energy,and biofuelsarepositionedfarbehind,takingonly11%oftheamountsinvested.Thesetechnologies,whichareriskierandhavelesspredictablefinancialflows,resembleindustrialactivitiesmore than infrastructure. Funds that finance only operational assets make up a majority of cases (74%). Thedevelopmentandconstructionphasesrepresent4%and6%offundsrespectively.Financingofunlistedcompaniesinthissectoralsoremainsrelativelyundeveloped(15%offunds).Privateequityfundsrepresentonly8%offundsthatinvestinrenewableenergysolutions,comparedwith80%forinfrastructurefunds.

Intermsofprofitability,itisinterestingtonotethatthetargetrateofreturnforfundsentirelydedicatedtorenewableenergiesisaround8.7%onaverage,comparedto9.8%forfundsseekingtodiversifytheirexposurebyinvestinginothersectorssuchasenergyefficiency.Thisconfirmsthetrendobservedamonginvestorstoturntootherriskierandmoreprofitabletechnologies.

Source :Novethic

Renewable energy technologies

1 967

1 876

655

346

76

6

5 076

150

Onshore wind

Photovoltaic (PV) solar

Offshore wind

Biomass

Biofuel

Geothermal

Total

Waste-to-energy

Amount invested(€ M)

PV solarandwindtechnologiesarethemostrepresentedwith76%of the totals investedinrenewableenergy.Theseareproventech-nologies that can produce electricity at aguaranteedrate,forperiodsofupto20years,viaresalecontractswiththeState,alsocalledFiT(Feed-inTariffs). « Institutional investors are very fond of this kind of infrastructure because they allow them to replicate a bond flow with a risk considered "quasi-sovereign", and returns ranging 4% to 5% higher than State debt »,highlightsPhilippeGarrel,HeadofInfrastruc-tureFundsatAcofi.


COUNTRy LOCATION FOR RENEWABLE ENERGy PLANT INVESTMENTS By FUNDS (TOP 10):

Ofthe19fundsinvestedinGermany,13financeonshorewindinfrastructure.ThefactthatmanyGermanroofsarealreadyequippedwithsolarpanelsisoneofthereasonswhythereissolittleinterestinground-basedPVsystemsinthiscountry(4funds).

Unsurprisingly,Italy(19funds)andSpain(10funds),whichbenefitfromexcellentirradiation,areprimarilyhometoPVsolarpanels(17funds).Onshorewindfacilitiesarealsopresentinthesemarkets(9funds).InSpain,thisisduetothefactthatlandownershipconflictisminimal.

FOCUS ON ENERGy EFFICIENCy TECHNOLOGIES

Novethichaslisted41fundsinvestingintheenergyefficiencysector,whichissubdividedintodifferenttechnologiesorservices.Accordingtotheclassificationpresentedonpage9,onlyfundswithathemeotherthanRenewableEnergyarelikelytobeincludedinthissector.TheClimate/EnergyTransitionfundsaretheonesthatfinancethemostenergyefficiencyprojects(28funds)followedbySustainable(8funds)andEnvironmentfunds(4funds).

NUMBER OF FUNDS INVESTED By ENERGy EFFICIENCy TECHNOLOGy (from a sample of 39 funds)

RENEWABLE ENERGy - NUMBER OF FUNDS INVESTING IN EACH COUNTRy (ExPOSURE)

StorageCogenerationServicesrelatedtotheenergytransitionDistrictheating(andcooling)SmartgridTransmission&distributionLighting&displayefficiency

United KingdomFrance

ItalyGermanySwedenFinland

SpainPortugal

IrelandNorway

11

4833

1919

121010

977

9

97

7

64

ThemajorityoffundsinvestinginrenewableenergyfinanceprojectsthatarelocatedintheUnitedKingdom(48 funds)andFrance (33funds).

InFrance,projectsmainlyconcernmaturetechnologiessuchasonshorewind(26funds)andPVsolar(22funds)technologies.

Theprojects targetedby funds investing inrenewableenergyintheUKaredividedbetweenproventechnologiesandriskierprojects:PVsolar (18fundsinvested),onshorewind(16funds),waste-to-energyrecoverymanagement(13funds)andbiomass(10funds).

Fundsarepositioningthemselvesmoretowardspromisingtechnologieswithinstorageandsmartcities.

Themajorityoffundsinvestingintheenergyefficiencysectorfavourdiversifiedexposurethroughothersectorssuchasrenewableenergyortransportation.Lessthanadozenfundsinourpanelareentirelydedicatedtoenergyefficiencytechnologies.

Source:Novethic

Source:Novethic


The funds that operatewithin the energy efficiency sector aremainly (at least for 15of these funds) positionedindirectlyonthissector,thatistosayviafinancingstart-upsorSMEsthatareexpertinthesesolutions.Indeed,energyefficiencytechnologiesaremorelikeindustrialsolutionsandrequirenewskillswithinmanagementcompaniesthatdonotalwaysallowfordirectinvestmentinprojects,especiallysincethecounterpartyriskisalsomuchmoresignificantinthissector.

Aswithrenewableenergyinstallations,themajorityoffundsinvestinginenergyefficiencytechnologiesfinanceprojectsorcompaniesbasedinFrance(14funds)andintheUnitedKingdom(10funds).

Focus: emerging technologies and themesSeveralgreeninvestmentthemesareemergingthatallowthemostambitiousfundstogenerateattractivereturns,evenifthetargetedprojectsarestillsmallandlimited.

ENERGy STORAGE: A NECESSARy COMPLEMENT TO THE DEVELOPMENT OF RENEWABLE ENERGy

Fundexposuretoenergystoragetechnologiescanbeindirectthroughthefinancingofunlistedcompanies,ordirectviafacilitiesalreadyequippedwithanexistingrenewableenergyplant.ThisisparticularlythecaseforMeridiamanditsTransitionfund,whichishelpingtofinancetheworld’slargestelectricstoragebatteryinFrenchGuiana(WesternGuianaPowerPlant).Atotalof11primarilyFrenchfunds inthepanel (€7.9billion)are involved instorage.Thesetechnologiescurrentlyrepresentaratherlimitedrangeofinvestmentsbutshouldincreasewiththedevelopmentofrenewableenergiesandelectricmobility.

SMART CITy: A CROSS-CUTTING THEME

AccordingtotheUnitedNations,citiesconsume78%ofglobalenergyandproducemorethan60%ofCO2 emissions. Someassetmanagementcompanieshaveidentifiedapromisinginvestmentthemearoundtheterm«smartcity».Thisparticularlyconcernsdistrictheatingandcoolingnetworks(7funds),smartlightingsolutions(4funds),thedevelopmentofagreenpropertyportfolio(8funds),andservicesrelatedtoeco-mobility(4funds),smartgrids(7funds),andmoregenerally,servicesrelatedtotheEnergyTransition(9funds).

Thesesolutionsconsistmainlyofoptimisingexisting installationsornetworks inorder tobettermodulateenergyproductionandconsumption.Thisiswhythesefundsaremoreorientedtowardsindirectexposure,throughequityparticipationinspecialisedcompaniesinthesector,ratherthandirectexposuretourbaninfrastructure.

Investor demand is becoming clearerInvestorinterestinunlistedgreenassetsisnotnecessarilystraightforward.Theymainlyseekgeneralistfundsofferingsolidprofitabilityanddiversifiedexposureviaawiderangeofprojects,includingatleastoneortwogreenprojects.Thisexplainsthelowdemandforin-depthenvironmentalreporting.

Reportingrequirements,particularlyinthecontextofArticle173oftheFrenchEnergyTransitionLaw,neverthelessencourageinvestorstocommunicateontheirgreeninvestmentsandthereductionofcorrespondingCO2 emissions. Thatsaid,theamounts investedbyFrenchinstitutional investors inTEEC-certifiedfundsremainmarginal (€1.4bninvestedinrenewableenergyinfrastructurefunds10).

10SeetheNovethicstudy,173ShadesofReporting,Season2,p.6.


Atthesametime,thereisagrowingphenomenonofinstitutionalinvestors,especiallypensionfunds,whochoosetodirectlyinvestincertaingreeninfrastructuresthatofferthemaclearandstableovertimerisk/returnprofile.TheseincludeonshorewindfarmsorPVsolarpanelpowerplantsalreadyinoperation.ForthemainFrenchinstitutionalinvestors,directinvestmentsinrenewableenergyinfrastructurerepresent€1.8billion11.

Inthefaceofcompetition,managementcompaniesareforcedtofinancethecreationofnewproductioncapacitiesornewtechnologies.Thus, theyare intervening furtherupthefinancingchain forprojects in the infrastructureconstructionphaseorevenat theendof thedevelopmentphase.This increasedrisk-taking isoffsetbyhigherreturns:whilefundsinvestinginassetsalreadyinoperation(brownfield)generateanaveragereturnof8.9%,fundsspecificallytargetingassetsyettobebuilt(greenfield)sawaveragereturnsof13.3%.Similarly,fundmanagerscanrelyonlessmaturetechnologiessuchasenergystorage,ormoreinnovativethemeslikethesmartcitytechnology,togeneratereturnsfortheirinvestorsthatrewardsuchexpertise.

Inaddition,somemanagers,suchasCubeInfrastructureManagers,ImpaxAMorOmnesCapital,takeanapproachthatallowsthemtoofferavarietyofprojectstotheirsubscribers.Bycombiningthelogicofprivateequityvaluecreation with the specific willingness within infrastructure investment to see projects being built, these actorsareabletoaccessclustersofprojectsassociatedwithrisk/returnprofilesthataremoreattractiveduetodirectparticipationwiththeprojectdevelopers.Somechoosetomultiplysmallprojects,suchastheinstallationofPVsolarpanelsontheroofsofprivatehomesintheUnitedKingdombyAvivaInvestors.Goodreturnsthenmakeitpossibletofinancetheaggregator’swork.

Lastly,partnershipsbetweenmanagementcompaniesandindustrialistsaremultiplying,suchastheoneconcludedbetweenATE(AmundiTransitionÉnergétique),anassetmanagementcompanyjointlyownedbyAmundiandEDFwhichisentirelydedicatedtotheenergytransition,andDalkia(specialistinenergyservicesandheatingnetworks).Thesepartnershipsallowmanagementcompaniestocombinetheirfinancialexpertiseofunlistedassetswiththetechnicalexpertiseprovidedbycompaniesinspecialisedfieldssuchasenergyefficiencytechnologies.

11SeetheNovethicstudy,173ShadesofReporting,Season2,p.6.


DaTa cOLLEcTION METhODOLOGy

The panel and Novethic databaseTocompletethisstudy,Novethiccross-checkedandanalysedmorethan500unlistedfundsavailableinEurope.Thesefundscomefromahandfulofdatabasesdedicatedtounlistedfundsthatinvestinbothcompaniesandrealassets(infrastructure,buildings,forests).ThedatabasesusedincludeIj Investors12andMorningstar(forFIPandFCPI).

Overall,Novethicgathered223fundssoldorclassifiedasenvironmental,duringallorpartoftheperiodcovering1990-2018.Thedetailedanalysisofalltheseelementsled toapanelcomposedofAlternative InvestmentFunds (AIF) investedspecificallyinenvironmental industries(water,renewableenergy,energyefficiency,etc.)andintechnologiesandprojectswithaprovenenvironmentalcontribution(cleantransport,wastemanagement,etc.).

Inordertoreachafinalpanelof223funds,variouscriteriawereretained:

Headquartersofthemanagementcompany:mustbelocatedinEurope;

Geographicalexposureofthefund:tobeincludedinthepanel,50%ofthefund’sassetsmustbelocatedinEurope.Forfundsmeetingthiscriterion,anygreeninvestmentsoutsideEuropehavenotbeentakenintoaccount;

Assetsheld:aportfoliomustconsistofatleast50%greenassets.

Theattributionofaspecificthemetofundswascarriedoutaccordingtotheinformationavailable:

Eitherthedifferentinvestmentsmadebythefundareknown,whichmakesitpossibletohaveamoregranularlevelofinformationbytechnologyandsector,andthusallowustodeducethecorrespondingtheme(seegreenclassificationaccordingtoNovethic);

Or,thedegreeofknowledgeoftheinvestmentsmadebythefundistooloworithasnotyetstartedtoinvest.Inthiscase,therankingisbasedonthecommercialandmarketingpositioningofthefundandthetargetedsectorsinordertodeducetheappropriatetheme.

12https://ijglobal.com/ij-investor


NOTES

with the support of

JaNUaRy2019

A study conducted between July and November 2018 by Jade Dusser Afonso, Julie Nicolas and Dominique Blanc of the Novethic Research Centre.

The sustainable transformation accelerator of the Caisse des Dépôts Group. Anexpertinsustainablefinance,areferencefortheresponsibleeconomyandnowanexpertiseaccelerator,Novethiccombinesapproachestoofferfinancialplayers,companiesandtheiremployeesthekeystosustainabletransformation.Research,fund analysis, market statistics, High-Impact SRI... our sustainable finance teamstrives toenhance the transparency, reliabilityandpositive impactof responsibleinvestmentandmanagementsolutions.

www.novethic.fr

© Novethic 2019 - Reproduction in whole or in part must be authorised by Novethic. Any citation or use of data must clearly indicate the source.

EuropE :PROMISING TRENDS

IN UNLISTEDGREEN FUNDSThE GREEN FUND MaRkET IN

INFRaSTRUcTURE, PRIvaTE EqUITy, PRIvaTE DEbT, REaL ESTaTE

aND FOREST

europe : promising trends in unlisted green funds · europe : promising trends in unlisted green...

Documents