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Ukraine war increases urgency for renewable energy, says Schroders chief

Russia’s invasion of Ukraine sharpens the urgency for a rapid expansion of renewable power to reduce European dependency on Russian energy, according to the head of one of Britain’s largest asset managers.

“There is no way that Europeans will remain dependent on Russian gas — this doesn’t feel like a comfortable place to be,” said Peter Harrison, chief executive of Schroders. “There is only one alternative, which is the rapid build out of renewable power.”

Europe relies on Russia for about a quarter of its oil and more than a third of its gas. The price of crude oil, natural gas and other global commodities has surged on concerns about supply following the invasion.

West Texas Intermediate, the US oil benchmark, rose as high as $115 a barrel on Thursday, a level it last struck 14 years ago. The price of natural gas traded in Europe climbed 4.1 per cent to €180 a megawatt hour, leaving it just below the record it touched on Wednesday.

Harrison was speaking as Schroders reported that annual profit before tax and exceptional items increased by a fifth to £836.2mn in 2021, slightly ahead of analyst consensus. He said the group’s move over the past few years away from traditional asset management towards faster-growing areas such as private assets and wealth management was starting to pay off.

This repositioning “makes sense from a plc strategy perspective”, said David McCann, analyst at Numis, in a note on Thursday. “We question how quickly the needle can be moved . . . given that most businesses being acquired are going to be small (in a group context) and organic growth in new areas is risky [or] can take a long time.”

Schroders has also been trying to tap into greater investor demand for renewables. The US and European markets for renewable energy assets are forecast to grow by more than $1tn to 2030 as part of the global transition to net zero.

In December, Schroders announced the acquisition of a 75 per cent stake in Greencoat Capital, one of Europe’s largest renewable infrastructure managers. The deal followed its July acquisition of a minority stake in Natural Capital Research, a research organisation that helps its clients develop ESG, biodiversity and net zero carbon strategies.

Overall Schroders’ assets under management increased 10 per cent in 2021 to a new high of £731.6bn. It said four-fifths of its assets outperformed their relevant comparisons over the past three years.

Harrison said Schroders had negligible exposure to Russia, having taken the view in 2018 that it was “uninvestable” from a commercial perspective. As well as hastening the transition to renewables he said the Ukraine war was likely to mean more global supply chain problems, increased spending on cyber defences and acute labour shortages. “Longer term it’s not good for inflationary pressure,” he added, echoing sentiments expressed by Luke Ellis, chief executive of hedge fund manager Man Group, this week.

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