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Pension investors list reforms needed to invest in UK renewables
16/10/2024
News
Australian infrastructure investment firm IFM Investors, together with UK and Australian pension funds worth £1.7tn in assets under management, have unveiled a blueprint to facilitate investment in clean power.
The blueprint advocates for reforming long-term public investment in the net zero transition, and maps out a comprehensive set of pro-investment policy settings across finance, planning, renewable markets and industrial decarbonisation.
The UK government’s clean power priorities include doubling of onshore wind, tripling solar power and quadrupling offshore wind over the next six years. Looking to work closely with private sector investors to achieve this, it also expects pension funds, both local and globally, to play a major role in financing the wider transition.
Funds, meanwhile, have a legal duty to prioritise the interests of pension scheme members, and need the right policy settings in place to facilitate their investment.
The key recommendation in the blueprint is to reform public sector net debt (PSND) by including the net worth of illiquid infrastructure investments for the first time. It comes against a backdrop of growing debate about the role of the UK’s fiscal rules in supporting capital investment and the design of the new government’s bodies Great British Energy (GBE) and the National Wealth Fund (NWF).
It is hoped that reforming the fiscal rules will help incentivise long-term public investment in the net zero transition, creating the conditions for NWF and GBE to crowd in pension capital at scale.
Other key recommendations to government include:
- Planning reform including incorporating the government’s legally-binding emissions reduction targets in the National Planning Policy Framework and enabling rapid permitting of the repowering of wind farms.
- Fast-tracking the deployment of renewable energy including through clearly-defined commercial objectives for GBE, as well as longer term contracts for difference to bring down the cost of capital.
- Supporting industrial decarbonisation and emerging net zero industries by focusing the NWF on supporting the commercial development of higher risk emerging net zero industries.
Signatories to the blueprint include the UK’s largest pension fund, the Universities Superannuation Scheme (USS); its largest Local Government Pension Scheme pool, Border to Coast; and the UK’s largest defined contribution fund, Nest; as well as LGPS Central and the North East Scotland Pension Fund. From Australia, Aware Super, CareSuper, Cbus Super, HESTA, Hostplus and Rest are signatories.
Collectively the blueprint signatories represent pension schemes that invest a combined £1.7tn (A$3.25tn) in the UK and abroad, including the retirement savings of more than 30 million UK workers and more than 10 million Australian workers.
Last year, IFM signed a memorandum of understanding with the UK government to invest £10bn into infrastructure projects by 2027. It is a founding member of the government’s British Infrastructure Council.
