Mobilising low-cost institutional investment in renewable energy

This report by the Climate Policy Initiative proposes the Clean Energy Investment Trust (CEIT) to overcome barriers—such as illiquidity and high due diligence costs—that prevent institutional investors from funding renewable energy. By designing the CEIT as a listed, low-fee vehicle focused on liability-hedging rather than high growth, the authors estimate that potential institutional investment could increase from $305 billion to nearly $4 trillion, significantly lowering the cost of capital for the energy transition.

• Institutional investment in renewable energy remains severely constrained, with direct investment potential for OECD institutional investors staying below 1% of total assets under management between 2010 and 2013. While the absolute potential rose from $257 billion in 2010 to $305 billion by the end of 2013, this represents only 0.6% of total long-term investor assets under management.
• The primary barriers preventing institutional investors from direct investment in renewables include illiquidity, lack of internal resources for due diligence, unsuitable investment structures, and restrictions on portfolio concentration in specific sectors. These barriers effectively limit direct investment to a small group of approximately 160 large institutions (60 pension/sovereign wealth funds and 100 insurance companies) with assets under management exceeding $50 billion.
• The proposed Clean Energy Investment Trust (CEIT) is designed as a pooled, listed, closed-end investment vehicle with low fees to address liquidity and size constraints. By shifting the focus from growth (as seen in US YieldCos) to long-term cashflow stability and liability hedging, the CEIT could increase potential institutional direct investment in renewable energy assets from $305 billion to nearly $4 trillion.
• The CEIT is intended to compete with investment-grade corporate bonds as a liability-hedging instrument. It aims to provide predictable cashflows and a return profile closer to an amortising project bond, potentially offering an internal rate of return (IRR) or yield to maturity more than 200 basis points higher than a Baa-rated investment-grade project bond in its early stages.
• The adoption of CEITs is expected to occur in stages across different investor groups. Large public-sector pension funds with experience in real assets and liability-driven investment strategies are identified as the likely initial core investors. Smaller, less sophisticated investors are expected to enter the market only after the CEIT matures and is included in third-party investment products or major indices.
• In the United States, the development of a CEIT market could lead to a 15-17% reduction in the cost of electricity for wind power. This reduction could make new wind generation cheaper than operating an additional 30.5GW of mostly coal-fired plants, potentially reducing CO2 emissions by 154.5 million tons.

APA

Huxham, M., Varadarajan, U., O’Connell, B., & Nelson, D. (2017). Mobilising low-cost institutional investment in renewable energy. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Barriers-report-final.pdf

Chicago

Huxham, Matthew, Uday Varadarajan, Brian O’Connell, and David Nelson. Mobilising low-cost institutional investment in renewable energy. Climate Policy Initiative, 2017. https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Barriers-report-final.pdf.

Wikipedia

{{cite report |last1=Huxham |first1=Matthew |last2=Varadarajan |first2=Uday |last3=O’Connell |first3=Brian |last4=Nelson |first4=David |title=Mobilising low-cost institutional investment in renewable energy |publisher=Climate Policy Initiative |date=August 2017 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Barriers-report-final.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{huxham2017mobilising, author = {Huxham, Matthew and Varadarajan, Uday and O’Connell, Brian and Nelson, David}, title = {{Mobilising low-cost institutional investment in renewable energy}}, institution = {Climate Policy Initiative}, year = {2017}, month = aug, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2017/08/August-2017-CPI-Energy-Finance-CEIT-Barriers-report-final.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }