Jul 01, 2013 Less than a week after President Obama unveiled an
ambitious climate change action plan, major U.S. investors are encouraging
policymakers to extend benefits available to oil, gas and real estate
projects to spur investment in renewable energy developments.
Specifically, investors are calling for the passage of the
Master Limited Partnerships (MLP) Parity Act, introduced by Sen. Chris
Coons (D-Del.), as well as tax code adjustments that would enable renewable
energy projects to be classified as Real Estate Investment Trusts (REITs),
an investment vehicle currently used to develop cell phone towers,
billboards and many other projects.
Investors in Ceres’ Investor Network on
Climate Risk (INCR) have
released a new fact sheet that spells out the clean energy investment
opportunity in MLPs and REITs and why members of the Network are calling for
“There is no apparent logic to the current exclusion
of renewable energy companies from the ability to form publicly traded
partnerships,” said Lowell Miller, Founder, President/CIO, Miller/Howard
“A large part of the intent in permitting energy companies
to become MLPs was to encourage the development of domestic energy resources
To fail to include renewable energy is, in effect, to
say that the government and its tax system wants to implicitly encourage
carbon-based energy development and to discourage—or not encourage—renewable energy development.”
MLP and REIT parity for renewable energy would help to
unlock a large source of capital for renewable energy developments.
pension funds manage more than $16 trillion in assets, roughly 75 percent of
which they invest in stocks and bonds in the public capital markets.
Unfortunately, this asset allocation limits institutional investment
opportunities in renewable power, as clean energy developers generate only a
small fraction of their financing from the public markets.
MLPs and REITs trade like stocks in the public markets, institutional
investors could use them to invest in clean energy projects while also
maintaining their preferred asset allocations.
“Master Limited Partnerships and Real Estate
Investment Trusts have for decades provided an effective vehicle to enable a
wide range of investors to fund America’s infrastructure,” said Jack Ehnes,
CEO, California State Teachers Retirement System (CalSTRS).
diversify these tools to connect today’s investors to tomorrow’s renewable
energy and energy efficiency infrastructure.”
“We’re looking for exposure to clean energy
opportunities throughout our $2.9 billion portfolio. The ability to invest
in clean energy infrastructure is particularly interesting.
many investors, we invest through the capital markets and are thus not in a
position to finance individual renewable energy and energy efficiency
projects,” said Joe Keefe, President & CEO, Pax World Mutual Funds.
changes, like those proposed for Real Estate Investment Trusts and Master
Limited Partnerships, could provide opportunities for investment by firms like Pax as well as individual investors.”
Current Internal Revenue Service rules are unclear on
whether solar and wind power projects can qualify as REITs. Clarifying these
rules to include renewable energy has gained bipartisan support, along with
MLP reform, even in a radically divided Congress.
Late last year, a
bipartisan group of 29 U.S. lawmakers sent a letter to the President
calling for changes to both MLPs and REITs.
“The client demand for renewable energy is abundantly
clear and the REIT structure is one that would enable exposure to a diverse
set of these assets,” said Matt Patsky, CEO, Trillium Asset Management.
investors avoiding fossil fuels, solar REITs are particularly attractive, as
the long-term nature of developer contracts and stable cash flows makes them
a strong proxy for utility sector exposure."
“Common-sense policy fixes related to MLPs and REITs
can help to get some institutional capital off the sidelines and into play,
but it is important to note that these measures alone will not open the
floodgates to renewable energy investment,” said Mindy Lubber, president of
Ceres and director of INCR.
“The Production Tax Credit and Investment Tax
Credit remain essential tools within the renewable energy industry. MLPs and
REITs will provide complementary benefits as the industry matures, and most
important, the proposed changes will help to level the playing field.”
The Investor Network on Climate Risk is a network of
100 institutional investors representing more than $11 trillion in assets
committed to addressing the risks and seizing the opportunities resulting
from climate change and other sustainability challenges.
Last month, 22 INCR
members signed the
Climate Declaration, asserting, “tackling climate change is one of
America’s greatest economic opportunities of the 21st century.”
information on INCR, visit
Ceres is an advocate for sustainability leadership.
Ceres mobilizes a
powerful coalition of investors, companies and public interest groups to
accelerate and expand the adoption of sustainable business practices and
solutions to build a healthy global economy.
Ceres also directs the Investor
Network on Climate Risk (INCR), a network of 100 institutional investors
with collective assets totaling more than $11 trillion. For more