"There isn't a very deep pool of investors ready to take those assets," says sustainability chief
CPP Investments is actively exploring opportunities to acquire utility and oil and gas assets that have fallen out of favor with competitors looking to divest polluting holdings, as reported by Reuters. This strategy aims to profit from reducing greenhouse gas emissions and reintroducing these assets to the market, according to Richard Manley, chief sustainability officer at CPP Investments.
Recent years have witnessed a surge in money managers shifting their focus toward the renewable energy sector in a broader effort to mitigate environmental harm. As a result, the sector has seen elevated valuations, prompting some to distance themselves from traditional energy businesses.
“There is an emerging imbalance between owners of grey assets readying themselves to sell them at multiples where the decarbonization thesis generates fundamentally attractive returns,” Manley told Reuters. “But there isn't a very deep pool of investors ready or in some cases maybe even able to take those assets onto their balance sheets.”
Manley emphasized the “institutional pressure for companies to accelerate decarbonization by selling their most conspicuous emitting assets.” At the same time, there exists “institutional reluctance of large parts of the market to buy grey assets to see their financed emissions increase near term.”
On the flip side, renewable energy projects have seen rising costs and declining returns, prompting investors in capital-intensive ventures, including offshore wind farms, to reassess their commitments.
Manley added that CPP also identified opportunities for “moving capital towards green investments selectively, where they generate compelling returns.” According to its most recent annual report, CPP has allocated 11% of real assets to energy and resources and 12% to utilities and other infrastructure.
