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Nuveen CPACE Lending strategy offers insurers access to capital efficient clean energy assets
Nuveen, the $1.1 trillion investment manager of TIAA, and Nuveen Green Capital (NGC), an affiliate of Nuveen and a leading provider of sustainable commercial real estate financing solutions, have launched a new strategy to give insurers access to a diversified portfolio of energy efficient, climate resilient, water conservation and renewable energy projects.
The Nuveen CPACE Lending strategy is designed to efficiently aggregate the financing of commercial property-assessed clean energy (C-PACE) projects for the unique requirements of accredited insurance investors, providing a capital efficient opportunity to access investment grade clean energy assets.
Six insurers have come together to form the initial group of investors.
Insurers Want to Invest in Energy Innovations
In a recent Nuveen survey of major global institutional investors1 , 82 percent of insurers said they plan to consider impact investments in the next year. In North America, 55 percent of insurers said they take climate strategy into account in their impact investing approaches. About eight in 10 insurers globally said they were investing in, or planned to invest in, energy innovations in the next two years; 79 percent identified infrastructure as a focus area of their impact investing.
“Insurers are interested in differentiated sources of capital efficient income, and increasingly motivated to address climate change,” said Joe Pursley, Head of Insurance, Americas, Nuveen. “The Nuveen CPACE Lending Strategy mirrors those interests, offering the prospect of long-dated, attractive and stable risk-adjusted returns via an investment grade product that finances energy efficiency commercial real estate projects.”
C-PACE Financing Yields Compelling Benefits
For investors, a diversified portfolio of C-PACE loans, originated by NGC, benefits from the support of NGC’s national footprint, midmarket focus and proprietary underwriting model.
“The Nuveen CPACE Lending Strategy is an exciting evolution in the C-PACE industry and sustainable real estate financing, broadly,” said Alexandra Cooley, CIO of NGC. “We are thrilled to deliver this proprietary investment opportunity to Nuveen’s growing insurance practice. The strategy invests in projects that reduce the environmental impact of buildings by increasing energy efficiency. This lowers operating expenses for businesses, helping them to compete locally and globally, and benefits local communities through the creation of jobs.”
Founded in 2015, NGC started as Greenworks Lending before Nuveen acquired and rebranded the company in 2021. NGC is a dominant C-PACE player, responsible for nearly 30 percent of historic market originations and the first to securitize the asset class. The NGC management team, including Jessica Bailey, CEO, and Cooley, helped develop the original statewide PACE policy framework in collaboration with state and local governments.2
NGC estimates that its projects have saved 2.6 million megawatt hours of energy and reduced the equivalent of 1.9 million metric tons of carbon, while saving $1.6 billion in energy costs for property owners and creating nearly 26,000 energy jobs.
1Nuveen, EQuilibrium Global Institutional Investor Survey – Insurance Edition: Nuveen and CoreData surveyed 800 decision-makers at institutions globally in October and November 2022. Of that, 193 were insurance companies: 46 from North America, 102 from EMEA, and 45 from APAC. Asset owner survey respondents represented organizations with assets of more than $10B (61%) and less than $10B (39%), with a minimum asset level of $500 million. The survey has a margin of error of ± 3.5% globally and ± 7.05% for insurance companies at a 95% confidence level.
2United States Department of Energy: 2016 C-PACE Report, lists the Connecticut C-PACE program as the first statewide C-PACE program in the U.S.
The Strategy's investments in C-PACE assets are subject to various risks, including but not limited to: risks of insufficient cash flow of the subject property due to impaired operations or value; risks of a decline in the real estate market or financial conditions of a major tenant; risks of delinquencies and defaults; failure of the subject properties to complete agreed upon construction, repairs or improvements or achieve projected energy savings; limited operating history of certain subject properties; risk of assessments underlying certain C-PACE assets failing to comply with applicable state or local laws; risks of disputes with subject property owners and mortgage lenders; environmental contamination risks affecting the subject property; lack of industry-wide prepayment information available for commercial C-PACE assessments; and changes in laws and policies impacting C-PACE programs. Distributions by the Fund are not guaranteed. The strategy's investment performance may be volatile. The portfolio is subject to subjective valuation determinations by the manager may not be able to realize such value on a disposition of a portfolio asset.
Nuveen, LLC provides investment solutions through its investment specialists. Nuveen Securities, LLC, member FINRA and SIPC.
Nuveen Green Capital is an indirect subsidiary of Nuveen LLC and Teachers Insurance and Annuity Association of America (TIAA) and a member of the TIAA group of companies.
