Abu Dhabi wealth fund Adia exploring investment opportunities in energy transition

Fund has supported approximately 22 gigawatts of operating renewable energy projects, with a further 19 gigawatts under development

The Solara 4 solar park, in Vaqueiros, Portugal. Investment in energy transition needs to at least quadruple, according to Irena. Bloomberg

Abu Dhabi Investment Authority (Adia), one of the world's biggest sovereign wealth funds, is exploring opportunities to invest in energy transition as the global landscape shifts to investments in greener and more sustainable projects and technology.

The wealth fund, which is a consistent investor in the renewable energy sector, held an energy transition summit in Abu Dhabi this week, "to actively consider how to invest into one of the major themes shaping the global economy, both now and into the future", said Khadem AlRemeithi, executive director of the infrastructure department at Adia.

"Quadrupling investment volumes into the energy transition will require ambitious policy, clear investment programmes, well-defined regulation and projects underpinned by well-structured contractual frameworks to attract more private capital."

Global investment in energy transition technology, including energy efficiency, reached a record high of $1.3 trillion last year, the International Renewable Energy Agency said.

However, annual investments need to at least quadruple from that level to keep the world on track to achieve the 1.5°C goal, Irena said in its 2023 World Energy Transitions Outlook.

Investments are also not flowing at the pace or scale needed to accelerate progress towards universal energy access, it said.

"Some clean energy technologies are mature, such as renewables. However others, like hydrogen, are still in a maturing phase and require meaningful development to reach commercial viability," Mr AlRemeithi said.

"Investors will need to strike a delicate balance between supporting proven technologies and fostering innovation to access the full spectrum of clean-energy opportunities that will support the transition."

According to Irena, investment in renewables reached an "unprecedented" $500 billion last year. However, this is less than one third of the average annual investment needed until 2030 to hit net-zero emission goals by 2050.

Adia has been a consistent investor across the renewable energy landscape, which is a core segment of the infrastructure department’s portfolio.

"We invest in renewables globally, including wind, solar, hydro, biomass and energy from waste," Mr AlRemeithi said.

"We continue to build renewable energy capacity and diversify into new areas, including storage and hydrogen. At the latest count, we have supported approximately 22 gigawatts of operating renewable energy projects, with a further 19 gigawatts under development."

Adia, which does not disclose its assets, invests on behalf of the Abu Dhabi government. It makes direct and indirect investments across asset classes such as equities, fixed income, infrastructure, private equity and property.

It is the largest sovereign wealth fund in the Gulf and the fourth-largest in the world, with estimated assets of $993 billion, credit rating agency DBRS Morningstar said in September, citing data by Global SWF.

The energy transition will create opportunities and risks across asset classes, sectors and geographies, Mr AlRemeithi said.

"With such a multi-faceted issue, it was important for us to hear from a broad range of viewpoints at the summit as a way to generate new investment ideas and further our understanding of emerging issues."

A similar internal event in 2017-18 resulted in the "introduction of a formal assessment of climate change factors for all new investments, and recommendations for how Adia could evolve its investment strategy to manage and benefit from changing market dynamics", he said.

The summit heard from thought leaders in academia, the investor community and corporates on the impact of the energy transition on major asset classes.

Presentations also covered the science of climate change, technology innovations, the geopolitical aspects of the energy transition, public and private market implications, the evolution of ESG regulation, and hydrogen and other energy storage solutions.

"Technologies such as energy storage, improvement of solar panel/wind turbine materials to increase renewable energy generation efficiencies, and digitised and decentralised smart energy grids are key to making renewable energy asset usage ubiquitous across the global landscape and achieve 100 per cent clean energy usage for all," said Mahesh Kolli, founder, group president and joint managing director of Greenko Group, an Indian renewable energy company in which Adia is an investor.

Meanwhile, with more than $150 trillion of investment required to meet global net-zero goals, private capital will be a "critical component" of a successful energy transition, said Scott Peak, managing partner and head of North America for Canadian asset management firm Brookfield’s Infrastructure Group.

"Investment opportunities across the energy transition spectrum have continued to come of age worldwide, with investable propositions driven by the declining cost of low-carbon technologies, supportive policy frameworks, company-led initiatives and the scaling and maturing of proven technologies," he said.

"Whether it’s new technologies, business models or government policies, the energy transition sector continues to evolve at an accelerated pace. It’s therefore critical for an investor to be well-informed to prepare for the opportunities ahead."