By investing pension funds in things that make life better for everyone we can support our customers’ financial futures, create shareholder value and improve our society. That’s inclusive capitalism and here we’ve included some of the numbers that tell our story
It’s predicted there will be a £1 trillion infrastructure gap in the UK between 2020 and 2030, and we believe that we, alongside other other insurers and pension funds, can continue to help tackle this issue by using pension funding from PRT transactions to invest in the UK’s infrastructure.
In our latest report, ‘The power of pensions', we predict that up to £190 billion could be invested in infrastructure by insurers and pension funds to back their pension promises over the next decade, helping to close the UK’s £1 trillion infrastructure gap.
Our £4.6 billion transaction with the Rolls-Royce UK Pension Fund is a good example of how pension risk transfer (PRT) deals work. We are committed to investing the premiums paid to us in a responsible way to secure pension payments for the long term. This includes investing in assets that are socially and economically useful, such as infrastructure and clean energy.
Private defined benefit and defined contribution pension assets have nearly doubled over the past decade to reach $47 trillion, presenting opportunities in pension de-risking, annuities and mortgages in the UK and US. The world's average life expectancy is projected to reach 77 by 2050.
“By joining up pension savings with areas of under-investment, we deliver economically successful and socially useful outcomes”
When we take on responsibility for paying pension scheme members following a PRT transaction, we use that money to invest in things we all need, like renewable energy, infrastructure and housing. In 2020 alone, Legal & General Capital's direct investment in real assets totalled £3.1 billion.
It's not all about investing in real assets like wind farms and buildings. We also invest in asset markets, providing the capital that companies need to grow and create jobs. Legal & General currently has around £1.3 trillion of assets under management. And because we invest so much, we have the influence to steer companies to behave responsibly. For example, Royal Dutch Shell agreed to introduce industry-leading emissions targets after pressure from Legal & General and others.
We are helping to reshape the urban landscape through a £150 million investment into Sheffield’s West Bar Square, a 200,000-sq-ft development comprising office space, Build-to-Rent homes, a multi-storey car park and landscaped public spaces. We have partnered with developer Urbo and Sheffield City Council to help to regenerate the city and support the UK’s post-crisis growth prospects, jobs and housing needs. This follows our other urban regeneration projects in Cardiff, Salford, Newcastle and Sunderland.
So far, we’ve invested £1.4 billion in clean energy infrastructure including wind and solar farms. We’ve invested in onshore wind technology and have provided debt financing into three offshore wind farms with the capacity to provide enough power for more than two million homes. And we’ve announced a £57 million deal to support Hermes Infrastructure, who provides solar photovoltaic systems for more than 9,000 private residences and social housing rooftops.
“We are investing in socially and economically useful areas which create jobs, drive wage increases, change living standards and deliver returns”
In 2019 we announced a £100 million commitment to back Sunderland City Council’s visionary plan for a new core business district, which will support the creation of around 3,000 new jobs in the area. In addition, we are involved in some of the UK’s largest urban transformation schemes in Leeds, Liverpool, Manchester, London, Bath, Cardiff and Newcastle.
The green light has been given for the development of a £215 million retirement community in Surrey. The project, a partnership between Legal & General and Inspired Villages, will offer 270 apartments across the Grade II-listed site and will be one of the UK’s largest retirement communities. It will create 175 construction jobs each year over its six-and-a-half-year build period, up to 80 new permanent jobs once complete and operational, and see over £170 million invested in to the local economy.
To help support the UK through its housing crisis, we will be building 3,000 modular homes a year by 2024. Modular homes transform the way houses are built in the UK, in a process that sees quality, efficiency and productivity driven up and costs driven down. The first Legal & General Modular Homes development is taking place in Selby, North Yorkshire, and will create 180 jobs: 130 jobs across the supply chain and 50 new jobs in the Legal & General Modular Homes team.
A good example of how we’re making a difference is our £4 billion commitment to a 50:50 partnership with Oxford University to develop homes for staff and students and to build science and innovation districts in the city. House prices in Oxford make it hard to attract all the talent that’s needed but by building more homes and cutting-edge facilities we can help to put the city at the heart of a fourth industrial revolution.
“By 2030 all new homes built by our housing business will be capable of operating at net zero carbon emissions”
Our Affordable Homes business alone has used pension money to secure a pipeline of 5,500 new affordable homes across the UK, valued at £1 billion. Within our wider housing portfolio, it’s our ambition to build 3,000 affordable homes annually by 2023. We build housing that is diversified across affordability, tenure and life stage. We deliver high quality build-to-sell, build-to-rent, affordable housing and specialist housing for the elderly.
We are investing in companies that are helping the UK meet its environmental challenges and, most recently, we took a 36% stake in The Kensa Group, one of the UK’s largest players in the ground source heat pump technology sector. Heating hot water makes up 25% of our energy use but Kensa’s technology is effective for creating homes with the lowest carbon emissions. We also invest in: Pod Point, one of the UK’s largest installers of electric vehicle charging points; Oxford PV, which is developing super-efficient solar panels; and Tokamak Energy, which is working to commercialise clean fusion power.
We are helping to provide the infrastructure that our society needs to thrive in the modern world. We’ve invested £230 million in the Kao Data Campus, a state-of-the-art data centre that services businesses along the London to Cambridge corridor, the largest data centre market and technology cluster in Europe. Kao was named in honour of Nobel Prize-winning physicist Sir Charles Kao, who pioneered the use of fibre optics at the site of Kao’s first data campus development.
Following a £44.6 million partnership with Croydon Council in 2019 to provide 167 homes for families on the waiting list, in 2020 we provided an additional 250 homes to families in the London Borough. The £21.6 million investment will bring our total investment to £66.2 million and will help the Council meet its affordable housing needs, support the homeless community and demonstrates the positive social impact of a proactive long-term investment with a local authority.