Unlocking investment for Net Zero infrastructure

The UK is the first major economy to set a legally binding commitment to reach Net Zero emissions by 2050, but decarbonisation rates will need to speed up if this target is to be met.

Alongside government commitments, we are now seeing a sea change in societal demands with consumers increasingly choosing companies who share their environmental concerns. This shift is driving an unprecedented level of confidence in the benefits of investing in a cleaner, more sustainable future across a variety of Real Assets.

We know that much investment can be achieved within existing regulatory structures, but many new and emerging technologies such as hydrogen and carbon capture require novel frameworks and incentives to enable low cost, patient capital to bring large scale investment. If that financing is unavailable then there is a very real risk that new Net Zero infrastructure, as well as measures to increase the resilience of existing assets, will not be developed at the scale and pace required.

Based on interviews with leading infrastructure investors, our latest report (commissioned by the Global Infrastructure Investor Association (GIIA)) examines both the level of investment required to reach the Net Zero 2050 target, and the policy recommendations needed to get there.

We estimate £40bn per year is required on average to be invested in new low carbon and digital infrastructure over the next ten years, with similar levels thereafter, to meet the UK’s Net Zero target by 2050.

The opportunities and challenges when considering accelerating efficient private infrastructure investment:

Global competition for UK
UK riskier for investors?
Investors need greater certainty
Future-proofing portfolios
How to accelerate benefits

Global competition for UK

Global infrastructure investors are becoming more sophisticated and specialist meaning the UK increasingly needs to stand out to attract a global pool of private capital.

UK riskier for investors?

Historically, the UK has been seen as the ‘gold standard’ by many investors but recent regulatory trends and political uncertainty are cited as increased risks.

Investors need greater certainty

Net Zero infrastructure has the potential to fit the investment characteristics of infrastructure investors, but more long-term certainty is required.

Future-proofing portfolios

Infrastructure investors are attracted to Net Zero infrastructure which they see will future proof their portfolios – ensuring they remain relevant in the long-term.

How to accelerate benefits

Accelerating Net Zero infrastructure investment with sources of private capital will keep costs down and bring forward the benefits of Net Zero.

50% of the new technologies required lack investment frameworks or sufficiently mature business models to attract low cost capital.

UK emissions so far

To achieve the long-term goal of delivering Net Zero, every sector of our economy has a role to play.

Surface transport, buildings and industry, plus the power sector remain the largest emitters, accounting for 75% of UK emissions in 2018 and are the areas most requiring big infrastructure expansion and renewal.

Strong progress has been made in decarbonising the power system, but other sectors need to start making a contribution to decarbonisation and new infrastructure is key to this progress.