The UK Infrastructure Bank (UKIB), headquartered in Leeds, opened to UK businesses this month.
Launched in an interim form, legislation is to be brought forward to ensure UKIB remains a long-term public institution.
The bank will partner with the private sector and local government with the dual objectives of investing in projects to help tackle climate change, particularly meeting the government’s net-zero emissions target by 2050, and delivering the government’s goal of ‘levelling up’.
UKIB will start lending to local authorities later in summer 2021.
The bank’s investment principles are outlined in its Framework Document. Acting as a cornerstone investor, UKIB will seek to draw in the private sector to finance and advance infrastructure investment which would not otherwise have had the necessary support and, whilst operating across a range of sector, it will prioritise clean energy, transport, digital, water, and waste.
The bank will adopt a patient capital approach, working in partnership with the organisations to whom it will be providing long-term finance. Of course, its investments are also intended to deliver a positive financial return.
UKIB will develop its own ESG strategy in collaboration with its shareholder. The bank has already made clear it will not lend or provide other support to projects involving extraction, production, transportation and refining of crude oil, natural gas or thermal coal (there are some very limited exemptions to this). Nor will it support any fossil-fuel fired power plants, unless part of an integrated natural gas-fuelled Carbon Capture and Storage (CCS) or Capture, Usage and Storage (CCUS) generation asset.
There had been calls for the UKIB to embed a “just transition” into the Bank’s mission so that environmental and social objectives are interlinked and consciously addressed, in much the same way as the European Investment Bank has now included a ‘ensuring a just transition for all’ as one of its four priorities to support communities which currently rely on carbon-intensive industries and whose employment and livelihoods are therefore most vulnerable to climate change impacts and the transition to net zero. This hasn’t been included in the UKIB’s framework document; that said, this document is reflective of the bank’s initial phase of operations and is to be reviewed no later than 12 months after its launch.
UKIB is a company limited by shares, its sole shareholder is the Treasury solicitor in their capacity as nominee for HM Treasury.
The bank’s £22 billion of financial capacity will consist of £5 billion of equity provided by its sole shareholder (the Treasury solicitor in their capacity as nominee for HM Treasury), £7 billion of debt (which can be borrowed from the DMO or private markets), and up to £10 billion of guarantees.