EU Climate Chief Expects Pension Funds to Help Revamp Grids
(Bloomberg) -- The European Union’s climate chief expects to attract the financial firepower of some of the bloc’s biggest pension funds to help modernize power grids that are key to the green transition.
As part of a new budget for 2028-2034, the bloc on Wednesday outlined a €410 billion ($475 billion) fund to help EU industries compete with overseas peers. Climate Commissioner Wopke Hoekstra told Bloomberg he’s confident that will entice Dutch and Danish pension funds to invest in the region’s electrification. He also said the extra funding should help convince skeptical countries to back a proposal to cut emissions by 90% by 2040.
“I was recently in conversations with Dutch pension funds who have a very significant war chest, and I’ve had similar conversations also with Danish pension funds for whom the same is true,” Hoekstra said in an interview. “They are interested, if we come up with an appealing and predictable recipe, to pour very substantial private sector money into electrification.”
Hoekstra is trying to win support for the European Commission’s emissions-cutting proposal, but a number of countries, particularly those in central and eastern Europe, have expressed concerns over a lack of finance to fund the transition. The EU unveiled a €2 trillion budget on Wednesday, with around €700 billion set to be channeled into climate-aligned objectives.
A drastic overhaul of the EU’s grids is needed in order to cope with the surge in renewables that are crucial to meeting climate goals. Some of the issues were highlighted in April, when Spain and Portugal suffered widespread blackouts, showing a lack of resilience. The question is how best to fund improvements. Pension funds are an option — and Dutch ones are among the largest globally.
The commission put forward a €410 billion competitiveness fund, which it sees as boosting EU industries versus their peers in the US and China in line with recommendations made by former European Central Bank President Mario Draghi. The budget also sets out a fivefold increase for cross-border energy projects, such as grids, under the bloc’s Connecting Europe Facility, totaling almost €30 billion.
Mobilizing money from pension funds to help fund EU infrastructure is seen as a key priority. Draghi estimated that an additional €750 billion to €800 billion in investments would be needed per year by 2030 to keep Europe competitive globally. The commission wants electricity to account for 32% of energy consumption by the end of the decade, from around 21% now.
“So it is not just only the €410 billion,” Hoekstra said. “If you leverage that, you’re talking about way more money.”
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