Active investments made
Shrinking bank balance sheets and increasing regulatory pressure on banks’ capital requirements means that insurance companies and pension funds can help fill the gap in capital lending for infrastructure.
Under the leadership of Nigel Wilson, Group CEO, we are well placed to accelerate our growth through investing in UK infrastructure. This helps stimulate local economies by providing employment in the building industries and encouraging local businesses to expand.
In addition, we’ve helped contribute to our communities at a national and local level. In 2012, we provided development funding for a sale and leaseback scheme to finance the building of the new National Football Centre at St George’s Park in Burton-on-Trent. We also established a joint venture with Imperial College to build student accommodation with a 45-year lease, in Clapham, South London. We have provided a £121 million commercial loan to the Unite Group, who are also responsible for building new student accommodation.
In 2012 the Group Corporate Responsibility and Ethics Committee set a public target to:
“Work with regulatory and policy bodies to ensure that the UK financial services industry as the appropriate regulatory environment to allow both insurance and pension fund assets to be invested in the long-term growth of the UK economy.”
We have backed this up with a significant amount of work with UK and European regulators including:
- greater adoption of insurers/investment in growth argument across EU has helped secure in principle adoption of Matching Adjustment under S2.
- aggregation vehicle to enable insurers to invest in small to medium sized business loans due to be proposed in UK.
- we were central to the Kay Report and feedback is complimentary about LGIM’s approach to long-term investment and governance.
- further potential opportunities resulting from the government decision to provide partial guarantees for infrastructure and export finance.
- continued publicity around the need for Green Bonds for fixed income investors via Climatewise to offset Solvency II capital requirements.
The future of economic value
Infrastructure investment is a long-term commitment. We see an opportunity to come up with creative solutions to today’s problems using our products and services in the development around infrastructure. There is also a real social purpose here. We think it’s an interesting idea to match people who have retired (through our underlying annuities investments) with the need to provide infrastructure to support the working population.
We will be exploring this further during 2013 as part of our strategy.