Isra-Mart srl : CBI warns on investment in low carbon

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Isra-Mart srl news:

The UK is failing to attract the level of investment needed to build a low carbon economy, the Confederation of British Industry warns.

The business lobby group said the existing funding channels of pension funds – in the form of indirect infrastructure investment – are insufficient to meet the scale and pace of investment, predicted to require £150bn of investment over the next 20 years.

The CBI said: “Institutional investors currently fund energy infrastructure indirectly through their investments in utilities’ debt and equity.

“But given that the utilities are unlikely to dramatically expand their capital base, this model of financing will not be effective in delivering new low-carbon investments at the required pace and scale.”

The CBI’s report – Risky Business: Investing in the UK’s low carbon infrastructure
– urged the government to reduce the market and policy risk associated with low-carbon investments by creating better regulatory conditions for investors.
It also said the government should push ahead with a green investment bank to help institutional investment funds flow into UK low-carbon investments.

It added bonds issued by the bank would appeal to pension fund investors.
However, it added that trustees’ fiduciary duty to invest in the most commercially competitive bonds mean a government guarantee would be required on a tranche of the green bonds to make them competitive and attractive investors.

The organisation’s research also found there was a perception that low carbon investments were too risky. Interviewees said returns were too uncertain and there was too much market, technology, policy and construction risk to bear.

CBI chief policy director Katja Hall said: “We know the UK needs a balanced energy mix to cut emissions and grow the low-carbon economy, but the big question now is how we pay for it. Businesses want to get on with building new low-carbon infrastructure, but there is still too much policy uncertainty. We need the government to set a clear direction of travel and to stick to it.”