Investing for a greener future

"Currently, we own a fund of approximately 100 billion yen in solar power generation, but we aim to further expand that."

Morimasa Matsuda, President, Daiwa Energy & Infrastructure Co., Ltd.

Established in 2018 as a subsidiary of Daiwa Securities Group, Daiwa Energy & Infrastructure was launched to leverage the expertise of its parent company to create a fund focused on renewable energy and infrastructure projects in Japan and across the globe. Over the past five years, the company has invested over 100 billion yen in solar energy projects, supporting the push towards carbon neutrality while also creating new value for investors.

With Japan looking to reach carbon neutrality by 2050, the Japanese government has adopted measures to support the proliferation of renewable energy products, with solar and wind holding much potential. So far, support from the government has come in the form of feed-in-tariff subsidies. But the transition to a new model – like that used in European countries, which is based on power purchase agreements – will be the next step for Japan as it looks to diversify its energy mix and lower dependence on fossil fuels from the Middle East.

"Private enterprises, including our company, play a crucial role in collaborating with the Japanese government to create a post-feed-in tariff system," explains Morimasa Matsuda, president of Daiwa Energy & Infrastructure. "As financial investors, we work together with the government to invest national capital in renewable energy sources. Individuals in Japan have substantial savings and pensions, and through financial institutions like pension funds, we introduce new financial investment assets, such as renewable energy infrastructure, to these individuals."

Daiwa Energy & Infrastructure currently offers domestic solar power projects as private funds to Japanese clients, including pension investments and banks. In the near future, by leveraging its 40% stake in Aquila Capital, the company plans to create a private fund specifically for Aquila's managed assets and European infrastructure, which it can offer to Japanese clients. "Additionally, we are looking at the use of blockchain technology to create products for private investors interested in solar panel projects," adds Mr. Matsuda.

Aside from solar, Daiwa Energy & Infrastructure also participates in wind energy projects. For example, in collaboration with Capital Dynamics, the Japanese firm has invested in an onshore wind farm in Scotland developed by a German firm. Such projects are part of Daiwa's strategy to increase its participation in greenfield renewable energy developments in Europe. "By partnering with companies like Capital Dynamics, who have extensive knowledge and experience in the field and the region, we can successfully execute these investments in new assets, particularly in Europe and other foreign countries," the president of Daiwa Energy & Infrastructure explains. "We partner with new companies whenever we invest in a new asset. In Europe and other regions, it is important to find local partners who have extensive experience in the field."

"We are constantly seeking new opportunities and partners," he adds. "Having said that, we have already established a substantial network of trustworthy relationships with partners across every region we are focusing on. Specifically, for solar power, our focus regions are North America, Europe, and Australia, where we have established partnerships with companies, though still pursuing further local relationships."

While Daiwa Energy & Infrastructure has also made investment in other infrastructure areas, including in telecommunications projects, the main focus will remain on greenfield renewable projects, helping conventional institutional investors to invest in this exciting and growing field. The company's business model, Mr. Matsuda reveals, is based on the history of Macquarie group, in which it owns and develops seed assets that will enable the creation of a future fund for clients of Daiwa Securities.

"Renewables and infrastructure offer stable cash flow, and once operational, we can create private funds. By entering at the development phase, we open up investment possibilities and use the asset to provide services to Daiwa Securities' clients. Over the next 5-10 years, our mission is to strengthen the pipeline so that Japanese investors can invest in renewable energy and infrastructure. Currently, we own a fund of approximately 100 billion yen in solar power generation, but we aim to further expand that."