The partnership will allow Nest to invest its members' savings in renewable infrastructure projects, such as solar and offshore wind farms in the UK and across Europe.
The scheme has estimated £250m will be committed this year, part of a potential £1.4bn investment by the end of the decade.
Octopus Renewables will arrange investment deals directly with the owners of renewable infrastructure projects, negotiating deals so Nest members are rewarded for injecting new funding.
According to Nest, Octopus Renewables is the largest investor of utility scale solar power in Europe, as well as a leading UK investor in onshore wind and biomass, managing a global portfolio valued at more than £3bn.
Mark Fawcett, Nest’s chief investment officer, believes investing pensions in renewable infrastructure is a win-win.
Fawcett said: “We want to invest in the energy of the future, not the past. The money we manage on behalf of our members needs to provide steady returns for the next 10, 20, 30 years.
“Renewable energy projects are fantastic opportunities. Every new site provides greater energy security, increases potential returns and contributes to tackling the climate emergency. We want to deliver bigger pensions for our members, in a better world.”
He added: “Investing in British green energy means our members will be investing in projects they can see and touch, a tangible connection to their pension and a way out of the climate crisis.
“The strong foundations of this kind of investment should help them achieve great returns for their future while directly investing in the future of the planet.”
A survey of 1,183 pension savers conducted by YouGov in July found almost two-thirds (65 per cent) of respondents thought their retirement scheme should invest in a way that reduced the impact of climate change.
Meanwhile, 79 per cent believed it’s important the economic recovery from coronavirus should take climate change into account.
Alex Brierley, co-head of Octopus Renewables, said: “With predictable income, diversification and sustainable investment all at the forefront of institutional investors’ minds, renewable energy is an incredibly attractive asset class, for which demand is growing at pace.
“This partnership will create a strong platform for Nest, covering a diverse range of technologies, geographies and assets across their lifecycle, whether that be at development, construction or operational stages. The fund will also allocate capital to growth opportunities in the wider energy transition.”
Pensions minister Guy Opperman praised Nest's decision to expand in this market.
Opperman said: “I welcome the decision by Nest to expand into innovative and green markets, and this should encourage other schemes to make the same leap.
“Nest’s action shows that schemes with economies of scale can access alternative investments, including renewable technologies, at a low cost to their members.”
amy.austin@ft.com
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