UKIB: Balancing return expectations to maximise impact

Building of the UK treasury building in London.
UK’s HM Treasury building in Westminster, London. Photo by Jim Osley on Geograph.

E3G’s latest briefing sets out recommendations and case studies for the UK Treasury as it decides on a financial return target for the UK Infrastructure Bank (UKIB). The publication aims to support the UKIB in structuring its financial return expectations and ensure that it can play a unique role in co-investing in new and growing sustainable markets while simultaneously delivering positive social and environmental impacts.

The cost-of-living crisis and the drive for UK energy security have demonstrated the critical need for accelerated investment in the net-zero solutions of tomorrow. The UK Infrastructure Bank will play a critical role in the UK’s transition by leveraging private investment in new markets such as energy storage, electric mobility, and nature. However, the Treasury has required the UKIB to achieve a target(s) of financial return, which has not yet been specified. This decision will be crucial to the Bank’s future impact and its success in meeting the UK’s policy objectives.

Our recommendations for the Treasury on UKIB’s financial return expectations include: 

  1. Set financial return expectations at a level that enables the UKIB to make long-term and low-yield investments—and signal this decision to markets as soon as possible.
  2. Apply the required rate of financial return to the portfolio, not on a project level, and use a flexible range of financing tools and KPIs.
  3. Build the Bank’s Advisory Function as quickly as possible to maximise overall return.

See the full briefing here.

The authors of this paper would like to thank the following contributors to this briefing: Rufus Grantham, Head of Urban Transition Finance, Co-Head of UK & Ireland, Bankers without Boundaries; Alice Bordini Staden, Managing Director, GLC Advisors Limited; Sarah Gordon, CEO, Impact Investment Institute; Dimitri Zenghelis, Special Advisor, Bennett Institute for Public Policy, University of Cambridge and Senior Visiting Fellow, Grantham Research Institute, London School of Economics; Gavin Templeton, Partner, Pollination; Polly Billington, CEO, UK100.


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