Brexit, the pandemic and the Ukraine conflict have all disrupted supply chains and marked turning points in the priority that European policymakers place on their own self-reliance.
More recently, focus has turned to our domestic cost-of-living squeeze and the price of energy in particular. As recently as 2004, the UK was a net exporter of energy, but since 2010, more than a quarter of UK energy has been imported.
The latest findings of our Rebuilding Britain Index research show that households want a different approach from government to energy supplies. It is also vital that efforts to level up the existing, and in some cases widening, inequalities the country is experiencing are not placed on the backburner.
In the wake of COP27, we are reminded the climate crisis remains one of the greatest challenges we face. Heading off the threat of climate change requires a sweeping shift away from fossil fuels, towards more sustainable sources of energy.
We believe a greater focus on energy security has long-term implications for the clean energy markets. We see European clean energy infrastructure as an essential investment, with the steps needed as much about energy security as decarbonisation. Governments across Europe have outlined detailed targets to accelerate the rollout of clean energy generation and energy efficiency investments.
Europe’s ambitious plans to improve energy independency will require a significant, long-term stream of investment scale-up in asset creation over the next decade. Real assets’ role in filling this funding gap makes it an important part of the productivity equation. Some €16.8trn (£14.7trn) of investment is needed by 2025 to achieve global net zero emissions. We believe the role of private capital has therefore never been more important in helping to protect the world we live in today and for future generations.
Policymakers and investors will also need to address the structural barriers to accelerating development of the clean energy market in terms of planning, grid stability, revenue lines and supply chains.
Our partnership with renewable energy specialist NTR represents a step-change in our commitment in seeking to help investors address their climate-related concerns. We expect further announcements on how policy will promote the rapid rollout of additional renewable and energy storage capacity, thereby continuing to put real assets at the centre of the solution to Europe’s self-reliance.
We are seeing signs of significant progress in unlocking the clean energy opportunity, but a meaningful expansion in the planning, development and management of clean power infrastructure assets is still required to deliver a secure and sustainable energy future for Europe.
We believe the turbulence the UK is experiencing reaffirms the importance of addressing the economic, energy and wider structural challenges we are facing on our own shores. Fully releasing the potential from levelling up within the UK and the delivery of a successful energy transition will require courage and continued commitment from patient capital in the private sector. The time is now.
Bill Hughes is global head of real assets at Legal & General Investment Management
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