Based in Leeds, the new UK Infrastructure Bank (UKIB) opened for business on 17 June 2021 to much fanfare.   UKIB is set to transform the financing landscape for climate action.

UKIB’s objectives are to tackle climate change – (particularly the UK’s net zero target) and to support regional and local economic growth – (to deliver the Government’s goal of “levelling up”).

The Bank will partner with local government as well as the private sector (initially) and will be operationally independent, working with HM Treasury.

UKIB has an initial £12 billion of capital to deploy and will be able to issue £10 billion of government guarantees, helping to unlock more than £40 billion of overall investment.

So, who can borrow from the bank?

For now, the Bank only offers private sector financing. However, the intention is that UKIB will invest in private and public sector projects as well as provide advisory services in the future.

The Bank’s website sets out the four investment principles which private sector projects must meet to be eligible for financing:

  • The investment helps to support the Bank’s objectives to drive regional and local economic growth or support tackling climate change.
  • The investment is in infrastructure assets or networks, or in new infrastructure technology. The Bank will operate across a range of sectors, but will prioritise, in particular, clean energy, transport, digital, water and waste.
  • The investment is intended to deliver a positive financial return, in line with the Bank’s financial framework.
  • The investment is expected to crowd in significant private capital over time.

The four investment criteria are just one part of the Bank’s decision-making process. The investment team will assess each application on a case-by-case basis and the project must meet all of the Bank’s objectives. For example, where an investment is primarily to support local and regional economic growth, it must ensure that it does not do significant harm against the climate objective of net-zero emissions by 2050.

There are certain projects the Bank will not, as a general rule, invest in, such as extraction, production, transportation and refining of crude oil, natural gas or thermal coal.  It may consider such projects where there is an improvement in efficiency, health and safety and environmental standards (without substantially increasing the lifetime of assets), for example supporting the decommissioning of existing fossil fuel assets.

What will UKIB aim to achieve?

The hope is that UKIB will be able to leverage private investment in infrastructure.  It will apply guarantees to de-risk projects and incentivise private investment in to net zero projects with the aim of transforming communities.

How can we help?

If you find this blog interesting and relevant and would like to continue the discussion then get in touch.  Call Heather Cunningham on 0161 926 0511 or email hc@haroldsharp.co.uk.