Exclusive: NY City Comptroller’s head of infra sees ‘strong tailwinds for renewables’

The New York City Comptroller is the custodian of multiple City-held trust funds and the assets of the New York City Public Pension Funds, giving it control of assets under management of around $194.5 billion.

This pile of capital gives the fourth largest pension fund in the US the power to move the needle on investment strategies more widely, including in areas currently under the spotlight, most notably renewables, which represent around a fifth of the fund’s entire infrastructure portfolio.

To find out more about the the City Comptroller’s strategy, Net Zero Investor speaks to Petya Nikolova, the fund's head of infra for the last decade.

As a pension fund, do you see mandates for renewables investments as a tempting proposition? What are the motivating factors for and against?

We look for the best risk adjusted return across the entire investable universe which includes sectors such as renewables, broader energy transition, digital infrastructure and transportation. Renewables have become an important part of the investment opportunity set supported by strong secular tailwinds. Both wind and solar technologies are now well established and achieving cost parity with conventional power. In the current environment what we mainly focus on while investing from the infrastructure part of our portfolio are any potential supply chain risks, resource constraints and merchant risk among other.”

Has regulation such as the US Inflation Reduction Act (IRA) spurred greater interest in renewables investing?

Historically, the industry has relied on tax credit that required authorisation from Congress every few years, which has created significant uncertainty for the project development. The IRA has created predictability for the renewable developers extending the tax credits 10 years.

In addition, the incentives were expanded to batteries which is helping spur project development. Finally, the IRA includes incentives in broad energy transition themes such as green hydrogen, carbon capture and sequestration. As a result of the above, we expect to see more projects developing not only in renewables but in the broader energy transition sector.

Would renewables mandates also interlink with any wider net zero goals the pension fund may have?

Naturally, there will be a link, but our investments as always will be in line with fiduciary duty.

Are renewables mandates a better proposition, on a fiduciary or ethical level, than oil and gas investments?

We look at the entire investment opportunity set not only in the energy sector, but also in digital infrastructure, transportation, water to find the best risk adjusted return for our beneficiaries.

Are there any specific areas of renewables investment that should be targeted, and are there any that should be avoided?

We are a global investor and through our managers support renewable projects across the world. Having said that we focus primarily on OECD markets. For our infrastructure portfolio we look for projects that deliver stable and predictable cash flows and avoid concentration on development.

Are you anticipating an increase in your renewables investments/mandates going forward? Are there any specific opportunities identified?

There are very strong tailwinds for renewables and energy transition driven by renewable standards, net zero plans for countries and corporations and supporting legislation such as the IRA. As a result, we have seen many managers increase their investments in renewables and energy transition and expect to see this trend continuing.

Last week, Net Zero Investor spoke to pension funds across the world on their approaches to renewables.