Government must empower the National Wealth Fund to drive low-carbon growth

• New briefing from the Aldersgate Group calls on the UK government to take further steps to provide the National Wealth Fund (NWF) with greater financial firepower and improve coordination across the public financial institution landscape.   
• In the long term, it recommends that government empowers the NWF to borrow directly from capital markets to increase its capital pool and finance more ambitious and higher-risk projects. In the short term, it calls for clarification on the mandates and synergies between public finance bodies (such as the NWF, GB Energy, and the British Business Bank) to address financing gaps.
• This should be supplemented by real economy policy to drive private investment and boost the UK’s public capital markets.
• The briefing also sets out several considerations for the NWF ahead of the publication of its Strategic Plan. These include highlighting where lessons can be learned from the UKIB, outlining the Fund’s understanding of investment opportunities, and aligning financial products with pension and insurance requirements to unlock institutional investor capital.  

The Aldersgate Group – an alliance of businesses, civil society organisations, and academic institutions driving action for a thriving low-carbon economy – has launched a new briefing setting out how to maximise the impact of the NWF.

The briefing, Maximising the Impact of the National Wealth Fund, welcomes the Fund’s strategic direction, increased capitalisation (£27.8bn), and remit to support the Modern Industrial Strategy and 10 Year Infrastructure Strategy. Its recommendations draw on the expertise of the Aldersgate Group’s cross-sector business membership.

In the near term, the briefing calls for improved coordination and clarity across the UK’s public financial institution (PFI) ecosystem to help investors and project developers navigate public financing. This could also play a role in addressing funding gaps for growth-stage companies.

To maximise impact in the long term, it calls for government to allow the NWF to borrow directly from capital markets once it has established a robust track record. It notes the Fund’s significantly smaller capital pool relative to international competitors in Germany, Italy, and Japan, all of which currently use this approach to bolster their available capital.

Additionally, the briefing urges the NWF to unlock capital across the full spectrum, most notably from UK pension funds and insurers. Although institutional investors are keen to channel money into low-carbon solutions, regulatory constraints and fiduciary duty currently prevent them from fully engaging with the Fund. By expanding its toolkit and aligning financial products with institutional requirements, the NWF can access this large pool of capital.

Rachel Solomon Williams, Executive Director, Aldersgate Group, said: “The National Wealth Fund has significant potential to play a transformative role in generating low-carbon growth and boosting our economic resilience while creating cascading benefits through new infrastructure and technological developments. By taking an ambitious long-term approach that learns from international competition and previous initiatives, the government can seize this major opportunity to drive much-needed investment in our low-carbon economy that will deliver benefits for people across the country.”

Bruno Gardner, Head of Climate Change and Nature, Phoenix Group, said: “The National Wealth Fund can play a critical role in unlocking capital to flow into climate solutions. In particular, better coordination between public financial institutions and aligning products so that they are structured to suit long term savings capital, would materially contribute to unlocking the £38bn a year needed to meet the UK’s 2030 Clean Energy target. We welcome the Aldersgate Group’s recommendations, and we look forward to continuing our conversations with the National Wealth Fund”

Richard Speak, Co-Founder & Managing Director, Finance Earth, said: “Finance Earth welcomes these recommendations, which rightly emphasise the urgent need for the National Wealth Fund to spur private capital at scale to deliver the UK’s green transition. Alongside clean energy initiatives, it is crucial that the NWF mobilises private investment into nature-based solutions, which can act as a significant growth engine for the green economy. We support the call to expand the Fund’s financial tools for blended finance approaches, especially through aggregation vehicles, to help de-risk investment in climate and nature-positive projects across the country. Based on our experience designing and fundraising for the UK Nature Impact Fund, we believe that public-private investment structures will be essential if the UK is to crowd in private investment at the pace needed to achieve net zero and a nature-positive economy.”

Adam Gillett, Head of Sustainable Investment, Railpen, said: “The National Wealth Fund is a promising initiative to mobilise private capital in support of the UK’s growth and clean power missions. As one of the UK’s largest and longest established pension funds, we recognise the critical role our sector can – and already does – play in financing the transition to net zero. As this briefing sets out, the National Wealth Fund has the potential to unlock investment and amplify the pensions sector’s impact, through interventions and financial products aligned with institutional investors’ requirements, and particularly our fiduciary duty to our members.”