From accord to action

Arjun Infrastructure sets out the case for DC capital in UK infrastructure, backed by the Mansion House Accord

UK Local Government Pension Schemes (LGPS) have shown that scale, strategic pooling and a long horizon can unlock infrastructure at attractive terms. Now, the baton is being passed to defined contribution (DC) schemes.

They have both a policy nudge and a compelling commercial case. The Mansion House Accord set a clear ambition: a voluntary pledge by major DC providers to allocate at least 5% of their default funds to UK private markets by 2030. That is not a political soundbite; it’s a signal that policymakers expect DC savers to benefit from the equity-like upside and the stabilising characteristics that private markets – and particularly infrastructure – can provide.

The LPGS experience serves as a powerful testament to this strategy. Their scheme assets, valued at approximately £392 billion, now include a meaningful and rising infrastructure sleeve, with recent analysis suggesting an average 6% allocation across funds.¹ However, at present, less than half of this allocation is in UK infrastructure.²

The investment needs in UK infrastructure are significant. The UK government plans to fund at least £725 billion for infrastructure over the next decade.³ However, private capital has an essential role to play, complementing government funding to deliver the strategy.

With UK workplace DC assets already exceeding £600 billion and growing fast⁴, there is a vast pool of capital historically concentrated in listed equities and bonds. This creates a significant opportunity to diversify into and benefit from long-duration, low-volatility, cash-generative UK infrastructure – while also supporting the UK’s growth and infrastructure strategy. This can also support engagement, connecting savers with their money’s mission, building out the infrastructure realities of their retirements.

A Mansion House moment for DC schemes

Private infrastructure aligns favourably with DC objectives. Investors seek capital growth, steady yield, inflation linkage and low cyclicality. The ‘real infrastructure’ assets Arjun targets are purposeful, long-duration and characterised by forecastable revenues and high barriers to entry. The quality of these forecastable revenues is particularly strong, often underpinned by government regulation, long-term concession frameworks and stable offtake contracts. These features are precisely what a pension portfolio needs to provide dependable long-term returns.

Crucially, the UK’s policy landscape is actively building an investible pipeline for patient capital. The government’s Clean Power 2030 Action Plan charts a pathway to a predominantly clean power system, with explicit aims around security, affordability and emissions reduction. In the UK water sector, Ofwat’s latest price review (PR24) supports a record £104 billion investment over 2025–30, including a fourfold increase in new infrastructure to address environmental outcomes such as storm overflow reductions, nature-based solutions, and resilience).  

In Arjun’s view, this long-term capex plan presents an opportunity for investors, supported by robust regulated capital value (RCV) growth that will extend well beyond the current price review period.⁵

Why ESG is a returns issue, not a side quest

The past year has seen a ‘vigorous debate’ and criticism of ESG. While some of this is a merited response to instances of greenwashing, much of the criticism – in this author’s opinion – has been misinformed, especially when applied to real assets like infrastructure.

Cutting through this debate, a simple truth remains: long-duration assets embed long-duration risks.

Policy shifts, technological advancements and evolving social expectations can either strengthen or impair the very cashflows that make infrastructure so appealing. This isn’t a debate of ethics versus returns, it’s about pricing reality, sharpening underwriting assumptions, protecting terminal value and enhancing the investment’s resilience.

As the UK’s green economy continues to grow, statistics from organisations like the Confederation of British Industry (CBI) reinforce that the net-zero economy is a “green growth engine”, with revenues and job creation outpacing the wider economy.⁶ ESG integration allows investors to plug directly into this growth.

The Mansion House push is about better risk-adjusted returns from assets whose cashflows are fundamentally wired into the UK economy.

It’s not just about risk management

Arjun remains committed that, when executed correctly, ESG also creates upside.

Take Welcome Break, a UK motorway service area business employing over 6,000 people, in which Arjun has been invested since 2017. The value-creation plan centres on operational excellence and a materiality-driven ESG programme that supports the shift to low-carbon mobility and strengthens social licence to operate.

Scaling rapid EV charging across the estate has improved access to reliable charging on the strategic road network, boosted site attractiveness and increased non-fuel spend – while preserving value as petrol and diesel volumes decline. Complementary upgrades – customer amenities, safety, accessibility and energy performance – support footfall and resilient rental and operating income.

What DC schemes could do next

To seize this opportunity, DC schemes could:

1. Use scale smartly. Leveraging the scale of asset pools is essential for effective fee negotiation and accessing opportunities. But so is partnering with the investment managers that can bring operational capability to manage assets actively.
2. Align governance with risk. ESG analysis must be the backbone of investment theses, directly informing due diligence on everything from policy durability and technology risk to physical climate pathways.
3. Favour UK pipelines with policy clarity. Opportunities exist within sectors with clear policy support, such as the PR24 water capex plan, grid and flexibility markets, and digital infrastructure.
4. Measure what members value. While financial returns and inflation linkage are paramount, the tangible, real-world outcomes of these investments can build public trust and deepen saver engagement.

The Mansion House push is about better risk-adjusted returns from assets whose cashflows are fundamentally wired into the UK economy.

For DC schemes, the question is no longer “should we invest in UK private infrastructure?” but rather “how do we strategically scale allocations to secure both robust returns and tangible outcomes?”