Amongst everything else the country is struggling with at the moment, the UK Infrastructure Bank (UKIB) is a beacon of hope. Launched just over a year ago, its dual mission is to support net zero and levelling up. The government has committed £22 billion for it to start driving positive change for communities, the economy and the environment.
The bank already has a portfolio of seven deals worth £610 million and has mobilised £4.2 billion of capital. But it doesn’t yet have a statutory footing. Introduced into parliament in May, the UK Infrastructure Bank Bill’s main aim is to secure the bank’s long term future and give it full powers and independence.
Although the bill provides for the bank to have a climate change objective, it currently lacks a broader mission to support nature’s recovery. And, worryingly, there are no safeguards or steers to prevent it investing in activities that run directly counter to the government’s environmental aims.
A stronger bill would design and equip the bank to play a powerful, catalytic role in environmental investment, earning a financial return while solidifying the government’s ambitions for climate, nature and the regions.
As chancellor, Rishi Sunak said the UKIB would help provide once in a generation investment to “build back better” across UK regions. Embedding robust future economy focused aims, like nature restoration and a circular economy, into the bank’s founding legislation will be critical to making sure this happens, creating good jobs, positive financial returns and regional growth.
Disappointingly, the first strategy of the bank states that it “does not currently see a pipeline of investable projects” in green infrastructure. It lays out the need to prioritise economic infrastructure, viewing green investments as an added benefit rather than a core activity. But this fails to recognise that green infrastructure is economic infrastructure. The bank could establish the precedent and shine in doing so. Establishing this pipeline would help to set new standards for green infrastructure and investment. The bank can enter the market where the private sector might be reluctant, with the luxury of being able to take more risks, drawing more private investment into the space as it goes.
Nature delivers financial returns
The Dasgupta Review last year illustrated the need to reassess how we measure growth and economic value, to halt the rapid and alarming decline in biodiversity worldwide.
There are nature-based infrastructure solutions which deliver a double win, boosting the economy whilst also having a positive impact on biodiversity. By extending the definition of infrastructure to include these, the bill will properly reflect the government’s policy intentions. It will also provide a level of legal certainty that ensures targets cannot be changed. Broadening the definition to include natural capital projects, such as natural flood defences or water quality improvements, will help to attract investment in natural infrastructure and give it the same weight as traditional infrastructure.
We were therefore delighted that the House of Lords agreed on 4 July to change the wording of the bill so that the definition of infrastructure explicitly includes nature-based solutions. An amendment was passed with strong cross party support. This provides legal certainty and aligns the text of the bill with the government’s stated policy intention that nature-based solutions are within the scope of the bank. We hope the government will accept this common sense amendment when the bill is considered by MPs in the House of Commons.
Our research shows the positive returns to be had from investing in nature. Projects to improve woodland, peatland, and parks alone could deliver 16,050 jobs in the 20 per cent of UK constituencies with the worst labour market outcomes, such as Copeland, County Durham, Wolverhampton and Ashfield. Nature-based investment has a higher cost to benefit ratio than traditional hard infrastructure investment, with £4.60 returned for every £1 invested in peatland and £2.80 for every £1 spent on woodland.
Joint Vivid Economics and WWF research estimates that agriculture and nature-based investment could generate financial returns of £4 billion annually by 2050. Restoring the UK’s coastal environment could bring benefits worth £50 billion by 2050, contributing to climate change mitigation and adaptation and creating over 100,000 new jobs.
The bank should help to derisk growth in the circular economy
UKIB should also play a critical role in derisking new investment in a circular economy (reuse, recycling, repair and remanufacturing), helping to prove the viability of these greener revenue streams on a grander scale. But the resources sector gets minimal mention in the UKIB strategy. It states the bank is open to financing circular economy projects, but it doesn’t expand beyond that. With more kickstart help from the bank this area of activity could eventually dominate areas of industry and retail, creating new economic opportunities and resilience. We have shown that circular economy infrastructure alone could support up to 450,000 jobs.
An explicit reference to nature in the bill would ensure the government puts its money where its mouth is. The government has made repeated statements highlighting its ambitions to take a natural capital approach to environmental protection and integrate nature-based solutions into climate change policies. This is a chance to deliver against the aims of the 2021 Environment Act, including legally binding improvement targets which will be agreed later this year.
Nature’s recovery needs to be given equal standing with climate priorities. Both issues are major threats to our economic well being and way of life. And investments in nature-based solutions and the circular economy won’t come at the expense of UKIB’s objective to support economic growth. In fact, they will make it easier to achieve.