One of the world’s largest pension investors, APG Asset Management, is buying into Australian renewable assets, attracted by the nation’s stable political and regulatory environment. It’s also looking to invest more alongside like-minded partners including super funds and international pension players.

The $1 trillion fund will inject $1 billion into Octopus Australia’s renewable energy platform OASIS, joining several existing domestic investors including Rest Super and Hostplus.

Around a third of APG’s $57 billion global infrastructure portfolio is in the energy sector. The fund is looking to double the allocation by 2031 and has been looking to expand its footprint in the Australian renewable market for some time, says Hans-Martin Aerts, head of infrastructure and private natural capital for Asia Pacific. Its previous investment include a 16.8 per cent stake in electricity network Ausgird, acquired from AustralianSuper in 2021.

“Together with [Octopus Australia], we will mainly seek to develop and build new projects and only look at acquiring projects where we can exercise control and typically have 100 per cent ownership, so that we can put together a portfolio of assets that allows us to optimise the revenue profile as much as possible,” Aerts tells Investment Magazine in an interview from the fund’s Hong Kong office.

To achieve that optimisation, it is important to match the demand and supply of energy – but renewables’ intermittent output makes that task more complicated. It requires deeper consideration and matching of different sources of energy – solar farms, which generate the most energy at midday when the demand tends to be the lowest, can be paired with the complementary generation profile of wind farms, or battery storage that can store and distribute energy for future use.

Aerts says that reduction in technology costs make renewable assets more attractive as alternatives to fossil fuels.

Although Australia’s economy is still heavily dependent upon fossil fuels, being the second largest exporter of thermal coal and liquefied natural gas in the world, the Labor government has outlined its vision for the country to become a “green superpower”. This includes establishing more stringent corporate rules for climate disclosures and issuing the first batch of sovereign green bonds that will be used to finance green projects last year.

Treasurer Jim Chalmers also made the controversial move of tweaking the mandate of the $307 billion Future Fund in 2024, asking the sovereign wealth fund to consider national priorities such as the energy transition in its investment decisions.

“For us, it’s all about all about partnerships. There’s always merit in working together with like-minded investors that have a local presence, and share similar beliefs and objectives as we do,” Aerts says, adding that the fund prefers to create value from projects over the long-term rather than spinning off an asset as soon as feasible.

“It has created a pretty favourable environment [in Australia] for new investments in renewable energy and it’s not just the government, it’s also the corporations as well as the ultimate consumers that have been showing a greater willingness to adopt and purchase renewable energy.

“We would certainly be seeking closer collaboration with not just the Australian super funds, but other international parties as well that share the same values and interests as us.”

In addition to Australia, India and Southeast Asia (predominantly Indonesia and the Philippines) are also regional core markets due to attractive macro factors like the rising middle-class population, urbanisation and fast-growing GDP. APG will also seek opportunistic investments in Japan and Korea.

APG is also looking to almost double its $5 billion private natural capital portfolio, but Aerts says that is dependent on the opportunities available. Asia Pacific investments in that part of the portfolio include Australian forestry business Forico, which APG co-invested alongside UniSuper, and New Zealand timber producer Wenita, which manages a 30,000-hectare plantation estate.