Renewable Energy and Sustainable Infrastructure

Executive Summary

Declining costs create soaring demand for renewable energy

  • Fueled by improving technology and declining costs, demand for renewable energy infrastructure has rapidly increased and is expected to grow significantly in the decades to come—the average cost of solar and onshore wind energy is now lower than power from conventional sources.

Complex financing requirements create high barriers to entry

  • While demand for renewable energy infrastructure projects is growing, traditional sources of financing are more limited compared to the broader infrastructure category, a dynamic that creates inefficiencies similar to middle market direct lending.

Higher expected IRR than traditional infrastructure equity funds

  • These financing inefficiencies create opportunities for highly specialized investment managers to privately negotiate deals with attractive yields, earn origination fees and secure yield enhancements from project sponsors and developers.
  • As a result, pure-play renewable energy infrastructure debt strategies can target higher expected IRRs than the larger, more generic pools of equity capital operating in the broader infrastructure space.

Debt protection with equity upside

  • Among infrastructure investments, we believe renewable energy infrastructure debt strategies are one of the most effective ways to generate attractive risk-adjusted returns.

Uncorrelated to corporate credit

  • These strategies also provide exposure to ESG characteristics and are expected to lower the correlation of a broader portfolio to the corporate credit cycle.


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Principal Risks

The principal risks are generally those attributable to bond investing. Holdings are subject to market, issuer, credit, prepayment, extension and other risks, and their values may fluctuate. Market risk is the risk that securities may decline in value due to factors affecting the securities markets or particular industries. Issuer risk is the risk that the value of a security may decline for reasons specific to the issuer, such as changes in its financial condition. High yield bonds carry particular market risks and may experience greater volatility in market value than investment grade bonds. Foreign investments could be riskier than U.S. investments because of exchange rate, political, economic, liquidity and regulatory risks. Additionally, investments in emerging market countries are riskier than other foreign investments because the political and economic systems in emerging market countries are less stable.