In recent days, the new UK government has been in conference with many of the world’s most influential and visionary businesses and investors. The so-called International Investment Summit produced a number of new policy initiatives aimed at rejuvenating an economy beset by regional inequality and the fallout from Brexit.
The stimulus is expected to focus on key climate-related areas such as clean energy and carbon capture. Two new carbon capture sites in the north of England and carbon capture, utilisation and storage-enabled hydrogen projects will create 4,000 new jobs, helping remove over 8.5 million tons of carbon emissions each year, according to government figures.
Notably, as the International Investment Summit concluded, the government announced the formation of the nation’s first sovereign investment fund, to be called the National Wealth Fund (NWF).
Britain’s Chancellor of the Exchequer Rachel Reeves said the NWF will facilitate tens of billions of pounds of private investment for the UK’s clean energy and growth industries, including green hydrogen, carbon capture, and gigafactories.
The NWF will have a total of £27.8 billion at launch, with the government bringing forward legislation to give the fund a broader mandate than just infrastructure.
Australian and British pension funds want the UK's National Wealth Fund to focus on higher risk net-zero industries, where it can play a valuable role bridging gaps in capital markets.
IFM Investors has an MOU with the UK government, pledging to invest £10 billion into the UK by 2027. Gregg McClymont, director at IFM said there are a number of steps to unlocking this investment: “A pre-requisite is that the UK government should account for infrastructure assets more like a long-term investor and less like a commercial bank, holding equity as loan collateral to be sold in a fire sale.”
IFM Investors, with US$150 billion in funds under management on behalf of 17 Australian industry super funds, has prepared a policy blueprint in association with UK pension funds, to help unlock investment and fast-track clean power in particular.
The paper contains targeted policy recommendations to mobilise pension capital and help deliver on the government’s priorities of doubling onshore wind, tripling solar power and quadrupling offshore wind over the next six years.
It urges the National Wealth Fund to support “the commercial development of higher risk net zero industries where it can play a valuable role bridging gaps in capital markets.”
Kristian Fok, CEO at Cbus Super, one of the parties to this collaborative paper, said, “By setting clear objectives and streamlining processes, there’s a compelling opportunity for long-term investors to partner with the energy sector and accelerate the deployment of renewable energy infrastructure, with the aim of securing long-term risk adjusted returns for members.”
The paper’s other recommendations include a streamlining of the permit process for repowering existing onshore wind sites, support for hybrid renewable energy systems and a prioritising the development of business models and markets for hydrogen and e-fuels.
The sovereign fund should also accelerate the delivery of energy storage solutions, “in particular long duration energy storage systems, through the development of revenue certainty mechanisms”, said the paper.
The new sovereign wealth fund initiative ties in with UK government unveiling commitments from the private sector to invest more than £50 billion into the economy, across artificial intelligence, life sciences and infrastructure. That sum includes a £20 billion investment from Australia’s Macquarie group that will include an electric car-charging network and offshore wind projects.
Deanne Stewart, CEO at Aware Super said, “The enormous scale of the energy transition and need for private sector capital should enable appropriate opportunities for generating strong, risk-adjusted returns for their investment portfolios.”
Posted 16 Oct 2024
