A senior executive at the UK’s National Wealth Fund has criticized the country’s banks and money managers for what he characterized as their failure to embrace the risk levels needed to drive the low-carbon transition.
“What I’m not seeing is enough appetite from the banks and the insurance companies, from the pension funds and institutional investors” to finance the low-carbon transition, said Ian Brown, the wealth fund’s head of banking and investments.
Speaking at Barclays Plc’s Sustainable and Transition Finance Conference in London on Wednesday, Brown said the wealth fund he helps run is taking on “a lot of risk” to support deals such as financing a gigafatory in Sunderland and tin mining in Cornwall. But Britain’s net zero targets will be realized only “if the private sector comes along with us,” he said.
A lack of investment has coincided with the UK falling behind on a number of key green goals. On Wednesday, it emerged that the target of having a clean power grid by 2030 is now at risk of slipping out of reach due to a lack of energy generation and network infrastructure, according to a report by the House of Lords Industry and Regulators Committee.
Brown said it would be unrealistic and impractical to rely on the public purse to finance Britain’s path to a low-carbon future.
“It’s not feasible, and I don’t think it’s reasonable, to ask the taxpayer to bear the burden,” he said.
The National Wealth Fund has £27.8 billion ($37.6 billion) in public money, which UK Chancellor Rachel Reeves says is intended to “unlock tens of billions more in private investment.” The fund, which is the re-branded UK Infrastructure Bank, can use a broad range of financial instruments, including equity, concessional debt and guarantees to help lure private investment.
Delivering the net zero transition globally comes with a price tag of over $200 trillion over the next three decades, according to BloombergNEF. Last year, however, investment was just above $2 trillion, as large sections of the private sector balk at declining asset valuations and lackluster returns on their investments.
Brown said Barclays stands out as a bank that’s helped finance climate tech startups, but also noted that the UK bank’s Climate Ventures portfolio represents only a “tiny, tiny, tiny piece” of its capital. Even so, “I’m not seeing any other bank in the UK taking that level of risk despite the fact that they’re probably better capitalized than they’ve ever been,” he said.
A former leveraged finance banker at Lloyds Banking Group Plc and UBS Group AG, Brown saved his harshest criticism for investment managers.
“The institutional investors particularly irritate me,” he said. “There are lots of large institutional investors out there beating their chests right now saying I’ve got a $10 billion transition fund, but the reality is they’re looking at fixed-bottom wind, they’re looking at solar, they’re looking at operational assets. They’re not taking construction risk. They’re very, very worried about technology risk.”
Daniel Hanna, Barclays’ group head of sustainable and transition finance who moderated the panel on which Brown spoke, said that a degree of risk-aversion is understandable.
“I know there’ll be many investors sitting in this room that are nursing, certainly mark to market losses, if not more, from having backed climate tech companies over the last four years,” Hanna said. “Valuations have come down quite dramatically and we’re seeing a bit of a funding squeeze.”
Photo: Commuters cross Millennium Bridge in view of skyscrapers on the skyline of the City of London. Photo credit: Jose Sarmento Matos/Bloomberg
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