UK pension funds intend to increase their investment in infrastructure over the next year, partly to help with the UK’s greenhouse gas emissions reduction plan.
The findings were revealed in research from GLIL Infrastructure, which showed that 62% of the 300 UK pension scheme leaders surveyed intend to increase their infrastructure investment over the year to help the UK’s 2050 net zero plans.
Aside from the pension scheme leaders’ primary fiduciary responsibilities to members, increasing investment in UK infrastructure was popular with 36% of responders choosing it as their main motivation.
Investing in infrastructure to deliver stable, inflation-linked returns was supported by 33% of those polled, while 32% supported powering the UK economy as part of their investment strategies, according to the research conducted by Censuswide on behalf of GLIL.
That said, the need to keep sustainability at the core of investment pipelines was cited by leaders surveyed as the biggest challenge to investing during the next 12 months.
Around 47% of leaders surveyed said they would increase their UK infrastructure investment if the government’s levelling-up policy is delivered successfully.
The findings also highlighted the challenges leaders face as they increase their exposure to UK infrastructure. Around 20% of responders said the need to keep sustainability at the core of investment pipelines was the biggest obstacle, while 18% cited a lack of suitable investment opportunities, ahead of planning concerns (16%) and political (16%) and economic (14%) instability.
Ted Frith, GLIL Infrastructure’s COO, said the UK needs ”significant investment to meet its future infrastructure needs”, concluding that it is encouraging to see so many pension scheme leaders planning to allocate further capital to the asset class.
Frith added: “Infrastructure helps pension schemes to make a valuable contribution to society as well as provide stable returns for their members, at a time where investment activity is under more scrutiny than ever before.
“Pension scheme members have access to reliable, inflation-linked returns, and a stake in projects that are supporting the transition to a more sustainable, lower carbon economy. These benefits are borne out in the findings of our survey.
“However, it’s also clear that more needs to be done to increase the supply of infrastructure investment opportunities with the appropriate risk versus reward profile for pension schemes.”
Also, 67% of UK pension scheme leaders surveyed said they intend to prioritise UK-based infrastructure projects over opportunities in overseas markets, GLIL said, adding that 56% of the 300 leaders polled have their infrastructure investments currently based in the UK.
And while 91% of the leaders say the government’s infrastructure policies adequately support the UK’s net zero ambitions, they also believe policymakers can do more to encourage greater investment in UK infrastructure, GLIL said.
Around 47% of the leaders surveyed said levelling up was the policy that would encourage them to increase their UK infrastructure investments the most, if successfully delivered, followed by the Chancellor’s Edinburgh Reforms (44%) and the National Infrastructure Strategy (41%), according to the research.
To read the latest edition of the latest IPE Real Assets magazine click here.
