Majority of institutional investors favor investments in energy transition projects – Nuveen survey

A majority (55%) of global institutional investors think they can “significantly influence” the progress of the energy transition by making investments in alternative energy and new infrastructure projects, as they seek to diversify their portfolios in response to heightened geopolitical tensions, higher rates, ongoing market volatility and upcoming elections.

Specifically, 57% of investors said they already have or are seeking to gain exposure to alternative energy, including renewables, nuclear and hydrogen power. In addition, 51% are interested in allocating to new infrastructure projects, including new energy storage/grids and battery storage.

These were some of the key findings of Nuveen's fourth annual EQuilibrium Global Institutional Investor Survey issued on March 21. The survey encompassed more than 800 institutional investors who oversee $18 trillion of assets and was conducted in October and November 2023.

In addition, more than half (55%) of global institutional investors plan to increase their exposure to private markets over the next five years, with private credit and private equity ranking as the most popular choices.

However, that figure is down from last year’s survey which found that 72% of global institutional investors planned to increase their stake in private markets.

Within fixed income, 48% of investors plan to increase their allocation to investment-grade fixed income over the next two years, making that the top pick among this asset spectrum. In addition, 40% of global institutional investors plan to reduce their exposure to equities over the next year.

“Across all fixed income segments, corporate debt is attracting interest from investors,” said Mike Perry, head of the global client group and global product at Nuveen, in a release issued in tandem with the survey. “Corporates were the top choice for investors allocating to investment-grade and below investment-grade fixed income markets as well as private fixed income markets. Investors are seeing greater value than before in these fixed-rate debt instruments.”

“Three clear themes are dominating investors’ focus as they position portfolios in the new regime,” Perry said. “First is the huge appetite for exposure to energy innovations and infrastructure projects as the energy transition plays out. The second is private credit and private equity being prioritized among growing allocations to alternatives.”

Lastly, Perry added, as a way “to position themselves to take advantage of these timely opportunities, investors are holding portions of their portfolios in higher-quality, liquid fixed income instruments.”

Institutional investors are also seeking to derisk in a new climate of higher-for-longer interest rates. As such, 50% of global institutional investors plan to increase portfolio duration in 2024 — up from 39% of investors in last year’s survey.