‘Smart money’ flowing towards UK green infrastructure

Speaking exclusively to edie, Gavin Templeton said that institutional investors at home and abroad are turning their attention to UK green infrastructure projects for the first time.

“It’s not quite a tsunami, but the smart money which has never invested in the UK before, is coming now,” said Templeton.

“I think it’s a sea change. Over the last 18 months institutional investors have started seeing sustainability as a good investment rather than something that is simply nice to have” 

American equity fund KKR for example, recently matched a £100m investment by the GIB in community-scale renewable energy projects across the UK. “KKR, they are the smartest guys in the room and they are telling use ‘we want to do more of this'”, Templeton added.

Domestic funds

Likewise, the GIB has also partnered with massive UK investors such as the Strathclyde Pension Fund, which controls £14.4bn.

Templeton, who decides whether an investment fits into the GIB’s ‘green’ criteria, said: “We’re also seeing the first tentative steps of UK institutional investors into this area, and that’s very exciting for us. We are always striving to be relevant and valuable to the taxpayer so we’re hopeful we’re going to see a lot more pension funds coming alongside us to invest in the future.

“People are looking at their portfolios and are looking to balance the risk they are facing with the dangers of stranded assets, the carbon bubble and the discussion around fossil fuel divestment.”

The largest sovereign wealth fund in the world recently dumped coal stocks from its portfolio, while the total worth of divested stocks soared past $50bn in September last year. “I think it’s a risk management thing,” explained Templeton. “If we can’t burn 80% of the fossil fuels on the planet then renewable energy investment and green infrastructure investments become much more viable.”

GIB guidance

It is the influence and transparency of the government-backed GIB that is helping to attract these investment whales to the UK in particular, according to Templeton.

“We spoke to KKR, and they told us the only reason they feel comfortable investing here is because we have that government mandate. We are seen as the kind of gold standard any investor wanting to enter the sector should align with.

“When the GIB was set up two years ago there was a joke that if we invested in your project there was something wrong with it and now if GIB is not involved without investment there’s something wrong with it. Its now a seal of approval.”

Transparency

Unlike Green Bonds, for example, the GIB requires that any project it invests in reports on its green impact annually – information that is made available to co-investors.

The aim going forward to is to make the investment process even more transparent by pricing externalities whether they be good – reducing waste and CO2 for example – or bad.

“That’s where you’re going to see the true value of green investments,” said Templeton, “When there’s a value on CO2 and water and waste. If we can put a pound value on those things it’s going to send a very strong message.”

Funding sustainability at Sustainability Live 2015

Gavin Templeton will be speaking at edie’s brand new high-level Conference as part of Sustainability Live 2015 in April. In a session titled ‘Funding sustainability’, the panel will explore how to get access to funding and the types of funding available – public and private. 

Find out more and register to attend Sustainability Live 2015 for FREE here.

Brad Allen