Experts turn to energy infrastructure investment amid rising uncertainty

From left EIP Asset Management CEO & President Heejun Park, head of infrastructure at Hyundai Marine & Fire Insurance Lee Jong-kwan, Edward Northam, head of the Asia Pacific at GIG within Macquarie Asset Management Pty, and BlackRock director Daniel Fuchs. [Photo by Kim Ho-young]

Investments in energy transition should grow by more than threefold by 2030 to achieve the carbon-neutral goal, with weighted portfolios in renewable energy, according to a green investment expert.

Edward Northam, the head of the Asia Pacific at Green Investment Group (GIG) within Macquarie Asset Management Pty, emphasized energy infrastructure investment amid increasing external uncertainties caused by inflation, high interest rates, and geopolitical uncertainties.

Northam spoke during the Global Alternative Investment Insights 2023 hosted by Maeil Business Newspaper in Seoul on Tuesday.

According to the forecast by Bloomberg New Energy Finance, the total investment in the energy transition, including nuclear power, hydrogen, renewable energy, transmission, and power management, reached $1.38 trillion last year. The investment in the energy transition market is expected to reach $4.55 trillion from this year until 2030.

Referring to this year as a turning point for energy transition, with renewable energy investment in the first half being the largest ever in six months, Northam stated that governments worldwide are offering great opportunities to investors as they seek not only to address climate change but also to achieve energy security through green investment.

Northam argued that investments in renewable energy infrastructure have become more attractive against a backdrop where high inflation and sustained interest rate hikes overlap with a global supply chain crisis.

In particular, facing an increase in the prices of all energy sources, renewable energy is inevitably gaining prominence as it maintains price competitiveness compared to fossil fuels.

He also added that renewable energy has made significant progress in cost reduction over the past decade, giving it the flexibility to adjust prices upward.

In addition, a significant supply-demand imbalance in renewable energy, with a shortage of supply, contributes to the robust trend of energy transition.

Northam advised focus on Asia, including South Korea when investing in energy transition, given that the region accounts for over 50 percent of the entire population.

Asian countries have ambitious goals for energy transition and accounted for nearly 60 percent of global renewable energy generation in 2022. He saw high potential in Korea for energy transition, being the world’s second-largest producer of batteries.

Daniel Fuchs, a director at BlackRock Inc., also emphasized that the attractiveness of infrastructure investments has increased as uncertainty has grown because infrastructure assets can quickly reflect interest rate increases, while it is difficult to significantly reduce demand despite rising costs.

Fuchs also mentioned the growing share of private debts in infrastructure investments, attributing the growth to the surging demand for private debt for resilient assets, implying high interest rates across the world.

During the panel discussion as part of the forum, Lee Jong-kwan, head of infrastructure at Hyundai Marine & Fire Insurance Co., said that infrastructure investments are attractive in times of high-interest rates because the appeal of alternative assets compared to bonds wanes, and real estate assets are in crisis amid high-interest rates. Infrastructure assets can consistently generate stable returns.