Old Mutual has pumped R30 billion into renewable energy

Insurance and asset management giant Old Mutual invested R30.7 billion in renewable energy generation in 2023 as the private sector continues to invest in alternatives to Eskom.

This was revealed in the company’s results for its 2023 financial year, where the insurer posted a strong performance. 

The company’s insurance revenue grew by 7.84% to R68.26 billion, while non-insurance revenue grew by 12.1% to R15.71 billion.

The company’s massive profit growth was largely driven by its impressive investment return, which increased from R20.41 billion to R135.9 billion – a 565.79% increase.

This resulted in profit after-tax growing from R5.65 billion to R7.63 billion.

In the 2023 financial year, Old Mutual also grew its investments in renewable energy as part of its shift to sustainable investments. 

The insurer invested R30.7 billion in renewable energy last year, up from R26.7 billion in 2022. According to Old Mutual, it funded 39% of South Africa’s total renewable energy capacity in 2022. 

CEO Iain Williamson told a media briefing that Old Mutual makes a lot of this investment through its private market business, which is specifically geared to invest in illiquid opportunities. 

This part of its business is designed to be able to invest in opportunities such as renewable energy, toll roads, and water infrastructure. 

These kinds of investments require significant capital upfront and do not generate returns for an extended period following the investment, making them unattractive to many investors. 

Williamson said they also require a significant amount of due diligence as the projects have to be bankable and generate sufficient cash flow to pay back the large upfront investment. 

Interestingly, Old Mutual also uses this part of the business to invest in student housing, which exhibits similar characteristics. 

The insurer is not the only major financial services provider pumping billions into renewable energy. 

Standard Bank revealed earlier this month that it aims to have financed R65 billion worth of renewable energy projects by the end of 2024 as part of its targeted R250 billion of sustainable finance by the end of 2026. 

The bank set an initial target of financing R55 billion worth of renewable energy projects in Africa within two years from 2021. This target was reached in less than one year. 

Now, Africa’s largest bank by assets aims to fund R65 billion worth of renewable energy by the end of 2024. 

Demand in South Africa, in particular, has increased exponentially since the government lifted the cap on private generation projects at the beginning of the year. 

The mining sector is the major player in building large renewable projects to mitigate the effects of load-shedding and diversify their energy streams away from fossil fuels. 

To meet this demand from large clients looking to go completely off-grid in South Africa, Standard Bank funded over 1,800 MW worth of renewable energy projects. 

The bank also provided over R2 billion in loans to small businesses to help them access alternative energy sources. Over R145 million was disbursed to individuals to install solar in South Africa. 

Demand for home solar solutions in South Africa jumped 400% last year, with Standard Bank’s LookSee growing its lending to nearly R3 billion. 

This forms part of the bank’s overall target of R250 billion in sustainable financing by the end of 2026. So far, it is 42% of the way to completing this target.