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Nest to invest millions in British green energy

Published: 16 March 2021

Nest, the automatic enrolment scheme managing the pensions of nearly a third of the UK workforce, has appointed Octopus Renewables, part of Octopus Group, to boost its investment in clean energy infrastructure.

Octopus Renewables is the largest investor of utility scale solar power in Europe, as well as a leading UK investor in onshore wind and biomass, managing a global portfolio valued at more than £3 billion.

It invests in and manages a diverse portfolio of technologies, including several rooftop solar assets in Manchester and Birmingham, and wind farms in South Lanarkshire and Northamptonshire. 

Nest, which currently manages more than £16bn of UK pension savings, is investing directly in green energy generation to secure stable, long term returns for its pension savers while helping achieve its ambition of becoming a net-zero carbon investor. 

Mark Fawcett, Nest’s Chief Investment Officer, believes investing the pensions of the UK workforce in renewable infrastructure at home and abroad is a win-win for all involved:

“We want to invest in the energy of the future, not the past. The money we manage on behalf of our members needs to provide steady returns for the next 10, 20, 30 years.

“Renewable energy projects are fantastic opportunities. Every new site provides greater energy security, increases potential returns and contributes to tackling the climate emergency. We want to deliver bigger pensions for our members, in a better world.

“All minds are focused on how to help Build Back Better from the pandemic and this move means millions of UK pension savers will be playing their part.
“Investing in British green energy means our members will be investing in projects they can see and touch, a tangible connection to their pension and a way out of the climate crisis. The strong foundations of this kind of investment should help them achieve great returns for their future while directly investing in the future of the planet.” 

Research shows that most people want their pension to be invested in a way that tackles climate change. Survey data conducted by YouGov (July 2020) among 2,010 UK adults, of which 1,183 are saving into at least one pension, showed:

  • 4 out of 5 adults (79%) believe it’s important the economic recovery from coronavirus should take climate change into account.
  • 65% of pension savers believe their pension should be invested in a way that reduces the impact of climate change. Just 4% strongly disagreed.
  • More than half of all adults (57%) are worried about the impact of climate change on their lives.

When told about the decision Anna Perry (41), a Nest member and CEO of Great Western Air Ambulance Charity, welcomed the news that the money in her pension can help reduce her carbon footprint, without her needing to take any other action:

“Climate change is a threat to us all, but it is reassuring to know that my pension provider is investing my money to help prevent it.
“I'm so pleased that investments focused on sustainable energy can provide a good return as well.”

Octopus Renewables will arrange investment deals directly with the owners of renewable infrastructure projects, negotiating bespoke deals so Nest members are suitably rewarded for injecting new funding. The mandate will target deployment into renewable energy projects and associated infrastructure, predominantly in the UK and Europe to support the transition to a net zero economy.

Commenting on the appointment of Octopus, Stephen O’Neill, Nest’s Head of Private Markets, was impressed by the range of investments the fund manager can offer Nest’s portfolio:
“Octopus stood out amongst a very strong field of candidates. They’re one of the largest developers of renewable energy assets in Europe, and carefully manage their energy price risk. 

“We’ll also have full access to their proprietary deal-flow, across technologies and geography. This gives us confidence that our investment will provide strong returns for our members.

“Private markets are no longer exclusively for defined benefit pension schemes. They will play an important role in our portfolio and help buoy our performance when public markets, particularly equities, are struggling.

“We are supportive of government initiatives that will help smooth the way for schemes to access the long-term return potential in private markets at the right price for auto enrolled members. We hope to be among the first of many defined contribution pension schemes to offer members the diversification and return benefits available beyond equity and bond markets.”

Alex Brierley, Co-Head of Octopus Renewables, calls the appointment a milestone moment: 

“With predictable income, diversification and sustainable investment all at the forefront of institutional investors’ minds, renewable energy is an incredibly attractive asset class, for which demand is growing at pace. 

“This partnership will create a strong platform for Nest, covering a diverse range of technologies, geographies and assets across their lifecycle, whether that be at development, construction or operational stages. The fund will also allocate capital to growth opportunities in the wider energy transition.”

Chris Hulatt, Co-Founder of Octopus Group:

“As gatekeepers to trillions of dollars, institutions, including pension funds and their members have a critical role to play in fighting climate change. There is a real opportunity here to help deliver the energy transition, meet net zero targets and shape the Green Economy – creating a meaningful impact that Nest’s members can be proud of.” 

Also part of Octopus Group is the fast-growth green energy company Octopus Energy. Launched only five years ago, Octopus already supplies over 2 million households across the UK.