Private market innovation: Border to Coast announces two propositions as private market programme grows to £16bn

16 May 2024

  • Additional £3.6bn committed by LGPS Partner Funds grows Border to Coast’s private market programme to £16bn.
  • Launches innovative ‘UK Opportunities’ portfolio on behalf of Partner Funds to drive £0.5bn of investment into UK productive finance assets.
  • Builds on Border to Coast’s collective commitment to support global net zero goals with further £1.2bn raised for its second Climate Opportunities proposition.

Border to Coast Pensions Partnership has launched two propositions and significantly expanded its private markets programme to £16bn following further commitments from LGPS Partner Funds.

With an additional £3.6bn committed in April 2024, the pool’s private markets programme has grown rapidly in the five years since launch. Approximately £12bn has been invested to date, with an estimated 28% reduction in fees secured for Partner Funds.

The latest commitments include £0.5bn pledged to an innovative ‘UK Opportunities’ strategy launched by Border to Coast in April. Designed to direct long-term high-quality investment into ‘productive finance’, it will invest in areas such as housing, transport, energy and growth finance, supporting new building and development across the UK.

Also included is a further £1.2bn committed to Border to Coast’s second Climate Opportunities offering (‘Climate Opportunities 2′) which invests in projects and businesses that are expected to make a material contribution to decarbonising the global economy. The second offering builds on the £1.4bn already invested through Climate Opportunities 1 which was launched in 2022.

Joe McDonnell, Chief Investment Officer, Border to Coast, said: “The success of our private markets programme to date is testament to the significant benefits pooling continues to bring to the table. Our collective scale and strong alignment with our Partner Funds’ needs has resulted in not only sizeable fee reductions and greater potential for attractive long-term returns, but also access to a broader range of global investments, the development of strategic partnerships with UK and global asset managers, and the ability to focus investment into areas such as climate solutions. Partner Fund support for our private markets team ensures we can maintain a commitment to proprietary research and portfolio management and confidently develop new and innovative propositions.”

The latest £3.6bn of commitments are to Series 2C of the private markets programme and will be invested across infrastructure (£0.7bn), private equity (£0.4bn), and private credit (£0.8bn), alongside the £0.5bn committed to UK Opportunities and £1.2bn committed to Climate Opportunities 2.

UK OPPORTUNITIES

Targeting investments in productive finance assets, Border to Coast’s ‘UK Opportunities’ portfolio seeks to deliver high-quality investment opportunities for Partner Funds that are also expected to have a positive economic impact. Investments under consideration include:

  • Residential housing: building new social and affordable housing, assisted living and build to rent developments.
  • Commercial property: developing offices, logistics, industrial, leisure, science and innovation parks, and the regeneration of brownfield sites.
  • Infrastructure: building social, communications, and transportation infrastructure.
    Renewable energy: renewable power generation and associated storage and grid infrastructure.
  • Corporate financing: funding the growth and expansion of UK companies through provision of debt and equity capital
  • Social Bonds: outcomes-based financing aimed at delivering a specific social or health impact.

The portfolio will focus on “additionality”, financing new projects that are also expected to add value to the local and wider UK economy. It aims to generate positive long-term returns, supporting Partner Funds in paying the pensions of more than 1.1m LGPS beneficiaries, with the added benefit of increasing investment in development that benefits UK communities.

“We are proud to launch the UK Opportunities proposition, a unique offering within the LGPS. The depth and breadth of productive finance assets it targets, funding new building and development here in the UK, as well as the two-way dialogue we expect it to open between local authorities and investors, marks it as an innovative proposition for our Partner Funds,” Joe McDonnell said.

CLIMATE OPPORTUNITIES

The Climate Opportunities portfolio seeks to deliver attractive investment returns through investments in assets and companies that will have a material positive impact on the energy transition and support net zero ambitions. This includes renewable energy, battery storage, electric vehicles and carbon capture, as well as areas such as sustainable food production and low-carbon cement and steel production. Among the projects Border to Coast’s Climate Opportunities strategy is exposed to includes:

  • A large battery storage system in South Wales. Located on land at a decommissioned coal-fired power station, the site can store 230MW of energy – an essential component to ensuring renewable energy can be stored and used efficiently and effectively.
  • A green hydrogen platform producing cleaner energy for industrial use such as sustainable aviation fuel and steel manufacturing.
  • UK projects focused on managing the stability of the electricity system in response to the rapid growth of renewables (known as synchronous condensers)

Joe McDonnell added: “The need for the development of technology and infrastructure to support the transition to net zero marks a significant investment opportunity, and we are proud to be able to provide Partner Funds access to this through the Climate Opportunities portfolio. Capital markets need to play a critical role in meeting the challenge of decarbonisation by providing funding to support the development of climate solutions. Continued investment in the energy transition is crucial if we are to meet global net zero ambitions.”

First launched in 2019, Border to Coast’s private market programme offers LGPS Partner Funds access to investment opportunities in the UK and overseas, including co-investments. Taking advantage of Border to Coast’s scale, it aims to secure enhanced long-term returns and cost-effective access to private markets through building strong partnerships with asset managers.

Source: Border to Coast Pension Partnership
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