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By Simon Jessop
LONDON (Reuters) - British pension scheme Nest said on Saturday it had agreed to invest up to 1.4 billion pounds ($1.95 billion) into green energy projects over the next decade through a partnership with Octopus Renewables.
Nest, which manages 16 billion pounds in auto-enroled retirement savings for more than 9.8 million members - one in three of the UK workforce - said it expected to invest around 250 million pounds in projects across Europe during 2021.
The tie-up with Octopus Renewables, the largest investor in utility-scale solar power in Europe and a leading investor in UK onshore wind and biomass, will be the first time Nest has invested directly in unlisted infrastructure assets.
Part of a broader industry shift to private market assets in a hunt for yield, the move aims to capture a slice of the expected surge in opportunities as Europe looks to shift to a low carbon economy in response to climate change.
"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," Mark Fawcett, Nest's Chief Investment Officer, said in a statement.
Under the deal, Octopus, which manages 3 billion pounds in assets will source the investment deals directly with the project owners.
"Octopus stood out amongst a very strong field of candidates. They're one of the largest developers of renewable energy assets in Europe, and carefully manage their energy price risk," said Stephen O'Neill, Nest's Head of Private Markets.
"We'll also have full access to their proprietary deal-flow, across technologies and geography. This gives us confidence that our investment will provide strong returns for our members."
Historically the preserve of defined benefit, or final salary, pension schemes, accessing private markets was crucial to help bolster returns, particularly when equity markets were struggling, he said.
($1 = 0.7167 pounds)
(Reporting by Simon Jessop; editing by David Evans)