To take advantage of clean energy investment opportunities, insurers should reassess their strategic assets, build/acquire the right skills and capacity, engage with relevant service providers to ensure they are better attuned to the clean energy investment landscape, and take a fresh look at a broad range of clean energy investment vehicles.
U.S. insurers control a considerable proportion of assets—in 2016 U.S. property/casualty insurers held cash and invested assets of $1.6 trillion, and life/health insurers held $3.9 trillion. The majority of these assets are bonds. Additionally, insurers are particularly interested in direct investment in infrastructure due to a number of factors, including infrastructure’s long duration, its stable and secure cash flows, as well as the diversification and risk-adjusted returns these assets offer. Insurers today are reevaluating their overall investment allocations with intent to increase their infrastructure investments, and clean energy infrastructure can be an ideal fit to meet insurers’ investment goals, particularly when paired with their long-term liabilities.
In this context, Ceres embarked on a study of insurers’ appetites for clean energy infrastructure investing, including wind power, solar power, energy efficiency, and energy storage. The study sought to identify barriers and solutions to scaling such investments. Ceres’ analysis included a survey of large insurance company groups—both property/ casualty and life/annuity insurers—extensive interviews with insurer group investment professionals and clean energy experts, and the development of findings and recommendations aimed at offering action-and-solutions-oriented guidance to the industry.
Ceres found that there is growing appetite for clean energy infrastructure investment within the insurance industry. For example:
70 percent of the surveyed insurer groups had increased their infrastructure investments in the past two years;
Insurer groups frequently identified utilities, clean energy and transportation as attractive infrastructure investments;
85 percent of the insurer groups surveyed contemplate investments in renewable energy, energy efficiency and energy storage;
52 percent of insurer groups surveyed have explicit strategies and goals for clean energy infrastructure investments; and
More than 50 percent of insurer groups surveyed believe clean energy infrastructure investments mitigate fossil fuel investment risk.
However, insurers also identified important structural, economic, or regulatory challenges to scaling their clean energy infrastructure investments. These challenges range from a lack of familiarity with clean energy investing, to competition for attractive projects, to uncertainty concerning National Association of Insurance Commissioners (NAIC) bond credit rating designations and possible misclassification of clean energy infrastructure investments. To address these issues, this report offers clear, practical recommendations for insurers, regulators, the NAIC, and industry associations which are all critical to unlocking the industry’s potential.
To view all insights and recommendations, download the full report.