Local authority funds should be offered an infrastructure clearing house as a means of attracting capital to regional projects, the head of the London Pensions Fund Authority (LPFA) has suggested.
Susan Martin, chief executive of the £4.6bn (€6.2bn) LPFA, noted there was still a disconnect between appetite for infrastructure projects and the capital mobilised.
Speaking at the recent Local Government Pension Investment Forum, she said: “What’s been interesting in conversations is the number of pension funds that want to invest in infrastructure, and the number of local authorities that have some projects that can’t get that investment.
“I know from discussions with a number of funds that it would be good if we had some sort of clearing house.”
She noted that it could be set up by the UK’s Local Government Association.
PKA, PensionDanmark and Sampension, three of Denmark’s largest pension providers, set up a similar ‘one-stop shop’ in 2012, allowing the authorities to plan, build and seek financing for projects.
The European Commission recently launched the European Investment Project Portal to give investors access to a pipeline of projects.
The notion of a portal aimed at local authority funds was also proposed in 2012 by the Smith Institute, a UK think tank, which recommended the creation of a clearing house for social projects to attract local government pension financing.
Martin said the clearing house could bring together local government schemes with the local authorities seeking project financing, enabling local authorities to put projects directly to funds “so they didn’t have the government going off to overseas investors”.
She said pension funds were still interested in infrastructure projects, noting her fund’s recent investment in a biomass plant as part of its £500m joint venture with Greater Manchester Pension Fund.
But she also argued that the similarly active Lancashire County Pension Fund had sought opportunities in Portugal, acquiring a stake in a local wind farm project.
“For a pension fund, we have to get the return we need to pay our pensions,” she said. “And if that’s not possible within the UK infrastructure environment, we have to go elsewhere.”
The UK government has stepped up its focus on infrastructure financing in recent years.
Earlier this month, it announced it would set up a National Infrastructure Commission to advise on future infrastructure spending.
The commission, to be chaired by Andrew Adonis, today announced John Armitt as one of its seven additional members.
Armitt, former chairman of the London Olympic Delivery Authority, in 2013 authored a report recommending the launch of a national infrastructure body at arm’s length from government.
Other members include Michael Heseltine, a former UK deputy prime minister; Tom Besley, a member of the Bank of England’s monetary policy committee until 2009; Sadie Morgan, chair of the design panel for the High Speed 2 rail line; Bridget Roswell, former chief economic adviser to the Greater London Authority; Paul Ruddock, chairman of the University of Oxford’s £2bn endowment fund; and Demis Hassabis, an artificial intelligence researcher.
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