Nuveen has won Insurance Asset Risk's Climate Mitigation Investment Initiative of the Year award for its Commercial Property Assessed Clean Energy (C-PACE) loan-based offering, allowing financing for renewable energy upgrades to commercial real estate.
Capital involved is repaid through a long-term special tax assessment of the property, made possible by a public/private partnership facilitated by US state policies.
The flagship Nuveen CPACE Lending Fund I raised $525m of capital in 2023 for a closed-ended vehicle developed specifically for registered insurers, and saved 312,541 MWh of lifetime energy on the seed assets of $376m by October, and reduced 245,111 tons of CO2 equivalent.
"As a long-term and responsible investor, Nuveen has a responsibility to ensure our investments are well-positioned to manage the climate risks, regulations, communities and policies that are developed to promote a net zero economy," Nuveen said.
The C-PACE structure allows energy/water improvements to be financed and amortized over their full useful life, repayment obligations passing from one building owner to another, which makes 'deep' energy improvements more affordable, such as building walls, windows, and solar.
The time they need to 'pay back' their investment in reduced utility bills - over seven years for rooftop solar in most US markets with federal tax credits, for instance - may leave some institutions struggling to justify the investment.
But with C-PACE such a solar system would be fully financed, the initial owner may keep the tax credits, and the full cost gets amortized over the 30-year warranted life, with a transferable payment obligation to future owners.
Nuveen collects the data required by the various US state and local property assessed clean energy laws, building "impact datasets for public reporting".
Nuveen Green Capital harbours long-term plans for models similar to its US-focused framework in the UK.
Alexandra Cooley, Chief Investment Officer, Nuveen Green Capital, told Insurance Asset Risk: "As an investment product, C-PACE typically offers higher yields than comparable products because the underlying security that the tax assessment structure provides has proven to deliver strong capital-efficient income, duration and diversification, alongside the opportunity to invest for impact without sacrificing risk-adjusted return. C-PACE is exciting because it's a scaled fixed income impact product attractive to institutional, specifically insurance, LPs. We hope there are many more behind us given the scale and urgency of the climate crisis."
