Throwing Retirees’ Money Into the Sea

Pensioners shouldn’t be funding big and untested renewable energy projects.

They should be an ideal investment for a pension fund. Renewable energy infrastructure projects are typically long-dated, environmentally friendly, and offer returns that are uncorrelated with the gyrations of financial markets.

But the potential rewards have to be commensurate with the risks — and pension plans shouldn’t be in the business of chancing their precious capital to persuade governments to subsidize innovative technology.

Unfortunately, that seems to be happening in the U.K. The government has been dragging its feet on whether to support the 1.3 billion-pound ($1.7 billion) Swansea Bay Tidal Lagoon. So the Wales Pension Partnership, which oversees 15 billion pounds of assets on behalf of eight local municipalities, said this week it would be willing to invest in the project.

Unlike solar or wind power, tidal power is always available so long as the laws of gravity obtain. A wind drought earlier this month that lasted for 12 days becalmed the U.K.’s wind turbines, which are capable of producing as much power as 12 nuclear reactors and in March generated record power levels. Day-ahead power prices surged to their highest for the time of year in at least a decade.

The asset management industry has a big role to play in funding infrastructure development and in using its collective financial muscle to make the world a greener place.

Read the full Bloomberg article here.