Treasury steers UK Infrastructure Bank to focus on economic infrastructure supporting energy security

In a letter to John Flint, CEO of the UK Infrastructure Bank (“UKIB”), Chancellor Rishi Sunak has urged UKIB to prioritise the funding of economic infrastructure projects which align with the government’s renewed focus on energy security.  

The UKIB’s March 2021 Policy Design and associated Framework Document describe particular investment priorities as being clean energy, transport, digital, water and waste. The Chancellor’s letter, however, seeks to narrow UKIB’s immediate focus to support for low carbon energy projects that accelerate the UK’s transition to clean energy. This steer comes in the context of the strategic importance of the net zero transition and the reduction of the UK’s reliance on fossil fuels in the light of current global circumstances.

Providing a little more detail about what the government considers in scope for UKIB’s clean energy agenda, the letter clarifies that projects which include nuclear, support energy efficiency and associated technology development or involve greenhouse gas removal (whether by engineering-based approaches such as carbon capture and storage or nature-based approaches such as afforestation and soil carbon sequestration) are all in scope. Social or cultural infrastructure projects will not usually be considered within the UKIB's remit except where such projects are combined with significant relevant economic infrastructure investment. The government has not lost its focus on the levelling-up agenda; investment is still to be targeted to support faster growth in regions with lower levels of productivity.

The UKIB’s scope for bringing through new technologies and scaling up existing small scale technologies which can help build the UK’s resilience to climate change is also emphasised. Highlighting the UKIB's ability to unlock the potentially significant flow of private finance currently in waiting to support revenue-generating natural capital projects, the Chancellor also encouraged the UKIB to consider its role in leveraging private finance investment in nature-based solutions to services such as water and air quality, carbon capture and biodiversity. UKIB has an opportunity to lead the way in actively considering how it can have a positive impact on natural capital through its investments.

With the full effects of the global pandemic still to come to fruition and in the light of the increased urgency to secure energy supplies and accelerate the transition to net zero, UKIB is set with a challenge on behalf of us all to develop innovative financing structures to support strategically important infrastructure projects. The future may look that bit brighter if UKIB can help bridge the gap for crucial private capital investment.