Despite recent market setbacks, Norway’s $1.8 trillion sovereign wealth fund, the world’s largest, remains committed to investing in renewable energy assets and will seek opportunities in both listed and private markets, Reuters reported on Thursday.
In 2024, renewable energy assets, including previously favored stocks like Danish offshore wind developer Orsted, experienced substantial market underperformance and significant valuation declines, according to the report.
Renewable energy bet leads to 10% loss in 2024
The fund experienced a negative return of 10% in 2024.
This loss was attributed to the fund’s direct investments in unlisted renewable energy infrastructure assets.
These investments include equity stakes in offshore wind farms developed in partnership with Orsted, as well as holdings in the renewable energy portfolio of Spanish utility company Iberdrola.
Despite experiencing negative returns in the recent past, the fund maintains its commitment to renewable energy investments.
The fund’s management believes that focusing on renewables is a sound strategy for long-term growth and sustainability, and that the current market conditions are temporary.
Optimistic about future of renewable energy
They remain optimistic about the future of the renewable energy sector and its potential for generating positive returns over the long run.
“We think that’s smart also for a very, very long-term investor … All of our investments are dependent on an orderly energy transition,” Harald von Heyden, the fund’s global head of energy and infrastructure was quoted by Reuters in the report.
He added:
You can probably buy renewable assets much cheaper now if you buy them as shares.
He added that the volatility in the private market was lower, and that being active in both the public and private markets should present some good deals in the future.
The fund aims to achieve its objectives by streamlining its operations and enhancing collaboration.
It has recently undertaken a significant restructuring initiative to merge its unlisted and listed renewable energy investment teams, according to the report.
This strategic move is expected to foster synergy, improve efficiency, and optimize the allocation of resources within the organization.
Starting in 2020, the Norwegian parliament expanded the investment mandate of the fund, permitting it to allocate capital towards unlisted renewable energy projects.
Norway fund refocuses: policy shift opens doors
This policy shift marked a significant departure from previous restrictions, opening up new avenues for the fund to support the transition towards sustainable energy sources.
However, this expanded mandate is not without limitations.
The parliament has stipulated that investments in unlisted renewable projects must be geographically restricted to Europe and the US.
Von Heyden acknowledged the fund’s slow start, attributing it to uncertainty about market timing.
However, he noted that the team has expanded from 15 to 20 people and is now identifying more opportunities, according to Reuters.
The fund’s primary strategic target remains offshore wind due to its European base and extensive network of potential partners.
von Heyden said:
But we also want to do deals in the other renewable energy infrastructure technologies. And enabling technologies such as grid and storage.
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