Inside Railpen’s push into UK renewable infrastructure and digital assets

Railpen, which manages £34bn of assets on behalf of railway pension schemes across the UK, holds a unique role in the UK pensions landscape, having taken on the administration and investment services for smaller defined benefit funds in the energy and infrastructure sector.

While most of corporate DB funds in the UK are now closed to further accrual, many of Railpen's clients are still open, leaving the fund relatively more space to invest in illiquid assets.

Railpen launched its Net Zero Plan in 2021, setting a target of achieving net zero greenhouse gas emissions by 2050 or sooner, alongside an interim goal of a 50% reduction by 2030.

The plan covers listed equities, corporate fixed income, real estate, private equity, and infrastructure. Over the years, the pension provider has steadily increased its allocation to renewable infrastructure, with these assets forming part of its £1.7bn long-term income fund and £500m growth strategy.

“While our investment in renewable infrastructure is not driven by net zero, we have a high conviction in the asset class, and they have been delivering on our mandates,” says Cristiana Dochioiu, investment manager at Railpen. 

Dochioiu is attending Net Zero Investor's Renewable Infrastructure Summit on 26 February, you can register for this event here. 

UK focus

Speaking to Net Zero Investor, Dochioiu explains that within the long-term income fund “is where we made our first direct infrastructure investment in subsidised long-dated renewables”.

Within the fund, there is a 50% infrastructure allocation, with roughly 25% of this in renewables including wind and solar, renewable biomass, and energy from waste—most of which is based in the UK.

Railpen has a natural bias towards UK infrastructure due to its liabilities being sterling-denominated and linked to UK inflation, Dochioiu explains. This is particularly relevant as the government continues to encourage UK investors to prioritise domestic infrastructure investment to support economic growth, following chancellor Rachel Reeves' Mansion House speech.

Alongside this, Dochioiu adds that the UK government’s strong backing for the energy transition has aided Railpen's journey in the renewable infrastructure space. Currently, the government has committed to an ambitious national climate plan, aiming to reduce greenhouse gas emissions by 81% from 1990 levels to achieve a net zero economy by 2035. As part of this, the Clean Power 2030 (CP30) initiative was launched just before Christmas, pledging to reduce fossil fuel use and fully transition to renewable energy generation.

“The UK government’s support for renewables has been world-leading and created a positive investing environment when we began looking at those assets. That is where we made our flagship investments in the sector,” Dochioiu says.

“The CP30 strategy is very positive for a variety of energy assets in the space. That, in itself, really emphasises the need for battery capacity to increase in the system, as well as the need for expanding solar and wind capacity. I think that will send a positive signal to the market.”

Despite a significant allocation to UK infrastructure, Railpen also has investments outside the UK, including Nordic waste management sector.

Early-stage renewable infrastructure

Beyond traditional infrastructure, Railpen also has exposure to early-stage renewables through its growth strategy, with 60% of capital deployed, out of which 50% is dedicated to assets such as utility-scale storage and wind.

“This strategy targets exposure to infrastructure assets that are in an earlier stage than the previous long term income fund,” Dochioiu explains. “This allows us to take on more growth risk and development and construction risk or growth revenue risk.

“The reason we allocated capital for this was that we wanted Railpen to start investing earlier in the asset lifecycle, avoiding paying higher operational premiums and giving the pension scheme the optionality to retain assets in the long term, effectively creating our own pipeline.”

As an example, Railpen acquired a 50% shareholding in AGR Group in July 2024. AGR is a UK-based sustainable infrastructure developer with 55 projects focused on the energy transition and food security.

Digital infra and data centres

For pension funds, investing in digital infrastructure and artificial intelligence (AI) is becoming increasingly intertwined with the transition to a low-carbon economy, particularly in grid technology and data centres.

“We are looking at synergies between the energy and digital sectors and deploying capital to support the growth of the AI sector.

“It could either be through energy solutions for the AI sector or by exploring opportunities within the data centre space to see whether we can find opportunities where we can participate in a business that offers those solutions,” says Dochioiu.

Talking specifically about data centres, she says that Railpen is exploring ways to ensure stable energy security for industrial users. “We have a pipeline of assets that we aim to connect over the next two to three years to build energy ecosystems for data centre users. It’s an exciting opportunity for both AGR Power and us.”

However, Dochioiu notes that while Railpen is actively exploring data centre investments, it has yet to find a solution that fits.

“Competitive processes usually come with very high price expectations. Sometimes you take more risk of overpaying for the asset or the platform.

“There haven’t been as many opportunities in the UK; the market hasn’t been as deep, and the ones that have been active have a really high ticket size.”

This caution comes as pension funds have been treading carefully around data centre investment and the AI transition.

Looking ahead, Dochioiu sees further opportunities in the energy transition, particularly in decarbonising heat networks and public transport, such as bus fleets and business-to-business solutions.

“In providing sustainable district heating solutions, there are more opportunities to participate in this market as the need to decarbonise these solutions becomes greater,” she adds.

Cristiana Dochioiu is attending Net Zero Investor's Renewable Infrastructure Summit on 26 February, if you are interested in the event click here, and you can register here.