While the conflict with Iran has choked off the flow of oil through the Strait of Hormuz, it has opened the tap from European pension funds and other investors looking to capitalize on increased urgency around the continent’s energy security.
Clean energy and other infrastructure project developers, along with climate tech fund managers, are finding a suddenly more welcoming reception from institutional investors in Europe, even as dealmaking in the Middle East itself has stalled (see, “Middle East sovereign wealth financed massive green investments. Now what?”)
European pension funds have long invested in offshore wind and solar for their green credentials. Geopolitical volatility – from the war in Ukraine to the escalating conflict in the Middle East – means they can now claim vindication as well on the basis of increased resilience of energy supplies.
“Energy security and resilience have become increasingly important considerations alongside the green transition,” Pernille Jessen, chief investment officer at AP Pension, the Copenhagen-based manager of DKK 179 billion ($27.7 billion) in occupational pension funds, told ImpactAlpha.
The impact of earlier renewable energy investments in Europe already is showing up in countries such as Spain, where Prime Minister Pedro Sánchez has staked out an anti-war position while crowing over the country’s low energy prices in comparison with some of its neighbors.
“Spain is showing how the energy transition and our commitment to renewables is ensuring our citizens, industry, businesses, workers and homes are less impacted than others,” Sánchez said last week.
The EU this month unveiled its Clean Energy Investment Strategy, which aims to mobilize private investment for clean energy on the continent.
Fund managers and project developers are increasingly positioning their clean energy, climate tech and deep tech funds as also providing Europe with increased energy sovereignty.
The dual goals of energy security and climate impact are “a priority increasingly underscored by current global trends,” Jeppe Starup, head of private capital and real assets at another Danish pension fund, PenSam, which manages some DKK 206 billion ($31.8 billion) in assets, told ImpactAlpha.
Growth capital
Denmark, which has clashed with US leader Donald Trump over his threats to seize the Danish territory of Greenland, also has an enviable renewable energy mix, getting more than half of its energy from wind, solar and biomass.
AP Pension and PenSam, along with Lægernes Pension & Bank, late last week invested a combined SEK 3.3 billion ($354 million) in SEB Nordic Energy, which invests in renewable energy assets such as battery storage, hydro and wind power across the Nordics.
“With our investment in SEB Nordic Energy, we are helping to support a stronger Nordic energy system that can deliver reliable power at a time of rising demand and greater geopolitical uncertainty,” said Jessen. AP Pension has invested 22.6% of its assets in green investments towards a target of 25% by 2030. That represents another $665 million or so in investment.
This week, the European Investment Fund, Italian pension funds, CDP Venture Capital, family offices and corporations such as Brembo, MBDA and Lucchini RS invested €85 million in Paris-based 360 Capital’s latest deep tech fund. The fund, Poli360 2, aims to commercialize technology developed in universities and labs, with a focus on Italy.
Last week, Munich-based UVC Partners secured €77 million towards €150 million it is targeting for a new fund to fill a gap for growth-stage ventures for European companies in climate tech, robotics, “dual use” technology, AI and other key sectors. The fund will help scale early stage ventures in its portfolio, such as nuclear power producer Proxima Fusion (see, “European climate investors embrace growth-stage deals”).
Montis VC in Poland reached an initial close of €50 million for a venture fund that will invest in early-stage startups building solutions for “energy, industry and resilience.” In Switzerland, the Meili family office and other investors backed an €18 million debut climate tech fund from Vitamin°C, which will invest in early stage ventures in Europe and the US.
Aging assets
Launched by SEB Asset Management in 2023, SEB Nordic Energy aims to speed up the energy transition by acquiring and modernizing small and mid-sized energy assets in Sweden, Norway and Finland, such as refurbishing aging wind turbines.
The Stockholm-based private equity fund also backs new development projects, including a suite of battery energy storage it is building out across Sweden. The fresh funding brings SEB Nordic’s total funding to $674 million, towards a targeted $1.6 billion. The Article 9 fund, the highest sustainability designation in Europe’s fund taxonomy, is managed by SEB Asset Management and has an investment horizon of 15 years.
The focus on upgrading existing infrastructure with permits and customers intact provides an immediate and predictable revenue stream for investors. A growing share of wind turbines in Sweden and Finland are coming to the end of their 20-25 life cycle; upgrading existing plants offers a low-cost and low-carbon way to ramp up energy output.
“That ‘repowering’ approach is designed to support stable, long-term returns because it targets established assets, rather than greenfield buildout, and seeks value creation through operational upgrades, improved flexibility and portfolio balancing across hydro,wind and storage,” AP Pension’s Jessen told ImpactAlpha.
The investment provides its pension savers with “stable and predictable long-term” returns, PenSam’s Starup said. “Our investment reinforces both the stability of our returns and the ongoing development of a secure, future-proof Nordic energy sector,” he said.
Nordic anchoring
SEB Nordic Energy’s portfolio of renewable energy assets is set to almost double over the coming years following the commitments from the three Danish labor market pension funds.
Nordic pension funds, given their proximity to Russia, have been particularly keen to build up the region’s renewable energy supply and even defense tech (see “European pension funds said ‘no’ to defense investments. Then came Ukraine… and Trump”).
With the Nordic region moving toward full electrification of industry and transport, rising demand for renewable energy such as solar and wind is expected to put extra pressure on storage, flexibility and grid stability.
SEB Nordic Energy makes direct investments in renewable assets in the Nordics that have traditionally been too small to invest in for large infrastructure funds and energy companies. This includes investments in geothermal energy systems, hydropower plants, solar energy, wind energy, combined heat energy efficiency, both through new construction and by modernizing existing facilities.
Earlier this month, the fund acquired Hestenes Kraft, a small-scale Norwegian hydropower plant, via its Locus Energy unit, which is one of the largest private owners of small-scale hydro power plants in the Nordic region. The Norwegian plant will be integrated into Locus’ regional hydropower cluster.
Hydropower provides “a stabilizing supplement to variable renewable energy, while battery storage and upgraded wind turbines increase flexibility and enable better utilization of the electricity grid,” the Danish funds said in their news release.
“Investments in a robust energy system—with diversification and strong Nordic anchoring—are not only financially attractive; they also strengthen society’s resilience in uncertain times,” said Peter Possing Andersen, chief investment officer at Lægernes Pension, which manages DKK 126 billion ($19.5 billion).
“That the investment is also in green energy underlines that security and climate can go hand in hand.”
