Over half a trillion pounds of investment is required by 2040 to achieve UK’s clean energy transition ambitions, according to research from Santander and Standard Life.
The analysis found that the UK’s clean energy transition will require at least £511bn of investment by 2040 to deliver clean-energy infrastructure and support the UK’s wider transition to net zero.
The report also noted that greater institutional participation could create approximately £120 billion of financing opportunities, support approximately £137 billion of bank capital recycling and generate around £3bn of financing savings.
The Mansion House Accord was signed by schemes representing 90 per cent of savers into defined contribution schemes, and signatories look to allocate at least 10 per cent of their main DC default funds to private markets by 2030.
One key potential area of private markets investment is into sustainability infrastructure such as wind and solar farms.
However, the report claimed that there is a mismatch between the characteristics of many clean energy infrastructure projects and those sought by institutional investors.
The report identified five practical solutions proposed to help address these barriers; credit enhancement guarantees, blended finance, aggregation, standardisation and greater collaboration between banks, institutional investors, project developers and public finance institutions.
Manuel Dusina, head of real assets at Standard Life, says: “The UK has no shortage of long-term capital available to help support the energy transition. The challenge is ensuring that capital can be deployed efficiently, with the right investors financing the right risks at the right stage of a project’s lifecycle.”
Institutional investors may also have to keep abreast of the shifting priorities when it comes to net zero. While incoming prime minister Andy Burnham has maintained Labour’s 2024 manifesto commitment not to issue new licences to explore new oil and gas fields in the North Sea, both leader of the opposition Kemi Badenoch and Reform party leader Nigel Farage have pledged to scrap net zero commitments if in power.