AkademikerPension considers increase in European renewables allocation, cutting US exposure

Danish pension fund AkademikerPension is no stranger to green energy, but its latest allocation stands out. The roughly $200m investment in CIP’s green private credit fund is evergreen, geared for the long-term and came over a week into the war in Iran.

Heightened geopolitical tensions are rewiring AkademikerPension’s investment strategy. The fund now intends to use its capital to build Europe’s strategic autonomy, opening the door to a European tilt in green energy holdings.

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Deliberate tilt

“I've said it before and I'm happy to say it again. At AkademikerPension, returns and responsibility go hand in hand”, CIO Anders Schelde affirmed when the CIP investment was announced.

Within the fund’s infrastructure portfolio, renewable energy is its largest sectoral exposure (28.7%) and the US is its largest geographical one. The portfolio sits within AkademikerPension’s private markets strategy which Schelde says is responding to geopolitical headwinds.

“After thorough discussions with the board, we have decided to make a dedicated effort to identify new private (unlisted) investment opportunities related to strengthening European strategic autonomy in energy, defence and the digital sector”, he told Net Zero Investor.

“This represents a deliberate tilt toward Europe within these sectors”, he adds. That tilt has implications for a portfolio largely concentrated in Europe and America.

“Since Europe and the United States are the primary geographies in the portfolio, this would, all else being equal, result in fewer investments in the US if we succeed”, says Schelde.

Success, he points out, would depend on identifying investments with risk-adjusted returns the fund deems appropriate. Additionally, for now, the tilt does not require an explicit change in direction, but Schelde says that door is open.

“This can be accommodated within our current investment strategy, but if we gain positive experience over the next 1–2 years, I would certainly not rule out making it a more explicit part of our strategy”, he explains.

On-going geopolitical developments have seemingly shaped the fund’s thinking. Schelde says this informs where the fund expects green energy opportunities to come from.

“Yes, the geopolitical situation has led to changes. We hope and believe that it will result in more attractive investment opportunities in renewable energy in Europe”, he explains.

Winner takes all

Implementing a European tilt, in all likelihood, will prove to be easier said than done.

Norges Bank Investment Management, which manages Norway’s $2.1tn Government Pension Fund Global offers a case in point. In a social media note published a few days ago, CEO Nicolai Tangen outlined the fund’s experience in Europe.

In the span of a decade, Europe’s share of NBIM’s portfolio reduced from 41% to 21%. Meanwhile, the American share nearly doubled to 55%. “This is not a choice we have made. It is what the market has dictated. It is market reality”, wrote Tangen.

The note cites concerns with Europe’s structural barriers, most notably regulatory and market fragmentation. Tangen says these are existential concerns for the European growth project.

Tangen says a song by Swedish bank ABBA – Winner Takes It All – has been on his mind lately. He reckons it captures the essence of what’s at stake.

“It is a song about a broken relationship — about winners and losers, with nothing in between”, he writes, “it strikes me as an uncomfortably precise metaphor for what is happening to European capital markets”.

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