Additionality of UKIB investments: Our approach

Additionality of UKIB investments: Our approach

31 October 2022


The UK Infrastructure Bank is a Government-backed policy bank set up to partner with the private sector and local authorities to finance infrastructure that helps deliver the Government’s ambitions for tackling climate change and to promote regional and local economic growth across the country. Additionality is a central operating principle for the Bank and applies both to individual deals and across the Bank’s portfolio.

This guidance sets out how the Bank assesses the additionality of all its private deals before the point of investment decision (ex-ante). We assess additionality ex-ante, ahead of a decision to pursue an investment, and ex-post, to evaluate the Bank’s impact and to help us review and improve our approach.

Assessing additionality is not a precise science, it is an exercise in judgement. We base our judgements on the best evidence available to us at the time we make them. We have consulted with similar external organisations to check and challenge our approach.

What is Additionality

Additionality is one of the Operating Principles that has been set for the Bank. It is part of our triple bottom line: UKIB’s investments must achieve one or both of our strategic objectives, generate a positive financial return and demonstrate additionality – focusing where there is an undersupply of private sector financing and reducing barriers to investment – thereby crowding-in private capital. HMT Green Book defines additionality as ‘a real increase in social value that would not have occurred in the absence of the intervention being appraised’. It is best thought of as the additional impact that results from our involvement in a project.

Figure 1: Measuring impact with additionality

Measuring impact with additionality

We take a broad definition of additionality for the Bank, considering both ‘financial additionality’ (additional impact brought by different terms, conditions, and structure of finance from what is available commercially) and ’non-financial additionality’ (our contribution to improved project and market outcomes, which would not have occurred otherwise). Other national investment banks and Multilateral Development Banks (MDBs) take a similar approach to how they define additionality.

Annex A illustrates different ways in which UKIB support can demonstrate additionality in different contexts, e.g. depending on how nascent or mature technology and financial markets are.

Assessing additionality

Assessing additionality is not a precise science, but rather an exercise in judgement which requires us to:

  • Be clear about our intended overall impact – We need to understand the overall benefits of an investment, how the investment contributes to the outcomes we have been tasked with delivering and how UKIB’s involvement delivers something that would not have been achieved by the market alone – and therefore provide additionality.
  • Understand relevant market failures and structural barriers and the role that UKIB can play in addressing barriers to investment – Our strategy document identified specific market failures and distributional impacts that we can help address and, in that way, provide additionality. These include policy uncertainty, frontier investments, scaling proven technology, co-ordination failures, removal of subsidy, and market capacity. (See p66-67 of the Strategic plan)
  • Test the counterfactual (i.e., what would have occurred without the intervention) – We can be additional even when a project would have gone ahead without UKIB, if, for example, our involvement accelerates development or means it happens at a bigger scale than would otherwise be the case or otherwise in a way that better meets our objectives. This could include improvements to material environmental, social, resilience and governance (ESRG) considerations of a project.
  • Think contextually – When considering additionality, we will typically look at contextual information such as the current macroeconomic or market environment. This means we might take a different view on additionality at different times – if, for example, commercial finance is more difficult to source at a particular point in time.

Every deal is assessed and rated on a case-by-case basis to identify whether it credibly demonstrates additionality. To do that, we ask questions tailored to the specific characteristics of the project and the context at the time. We have identified some examples of these questions below. Not every question identified here applies in every case and we will likely also want to ask other questions too.

  • What would happen in the absence of UKIB support? Will the project not happen at all, or will it happen to a slower timeframe or at a smaller scale?
  • Has the project attempted to raise the required capital? Why is it struggling to raise it?
  • Why is the project looking to raise this specific quantum of finance? Could it start with a smaller capital raise?
  • What can UKIB add to this deal? Are new co-investors being drawn into the deal? Are we involved in creating an innovative financial structure? Would UKIB increase the scale of the benefits that can be realised from this investment?
  • How might this deal affect the market in this sector?
  • Have we secured any specific conditions or terms that increase a project’s impact against our objectives in a way that otherwise would not have been the case?

We look for evidence to support the answers to the questions we ask. The evidence we consider is again tailored to the circumstances of individual deals. It might include expert judgements, market engagement (including with the counterparty concerned), external reports, financial data, internal models and analysis, and academic and wider engagement. The following table presents examples of distinct types of evidence that we might consider. The list is not exhaustive. We will continue to develop our approach as we do more deals.

Table 1 Demonstrating additionality - evidence

Demonstrating additionality - evidence

Ex-post additionality assessment

As well as assessing additionality ex-ante (at the point of agreeing to provide finance), we will typically seek to evaluate our additionality ex-post (after deal delivery and across the portfolio through monitoring and evaluation).

This guidance is concerned with the ex-ante stage. This ex-ante assessment, as well as guiding decision making, also gives us a benchmark to evaluate our assessments against ex-post when further information is available.

We continue to consider how best to report on our ex-post assessments and will say more on this in due course.

Annex A: Additionality and market maturity

The Bank’s role varies across the economic infrastructure sectors based on the maturity of specific technologies and financial and infrastructure markets. The below provides examples of the roles UKIB might play in different markets, but UKIB’s additionality is not limited to the cases described below.

In immature and nascent financial markets for a technology or sector that is new/emerging and uncertain, UKIB could be additional in the following ways:

  • Limited number and types of financial institutions and instruments especially debt lenders that demonstrate a healthy risk appetite for a new technology/business model. It requires time and expertise to assess new risks and get comfortable with the return expectations. UKIB can help through signalling its support and making investors comfortable by demonstrating these risks are lower.
  • UKIB creates the space to shape the financial models and projects to deliver greater impact and attract more investment.
  • UKIB supports the transition to new financial and commercial models that reduce the subsidy needed.
  • UKIB attracts new pools of capital such as pension funds.
  • UKIB brings in a diverse set of investors to increase capacity and create a greater choice of options for raising finance.

In these markets, UKIB can act as an investor of first resort, not simply correcting market failures but shaping new technological and institutional markets.

In more mature financial markets and technologies, UKIB could be additional in the following ways:

  • Where there is a limited supply of finance in the market, for the socially optimal investment needs of a sector at any point in time, and where UKIB support can accelerate or scale up investments.
  • Where UKIB has a role in helping a sector/technology to access new sources of finance or new financial products or instruments that increase investment overall.
  • By addressing specific perceived risks in financial markets, that are not aligned with the actual risks (information asymmetries).

The following questions can be used to probe additionality in a sector:

  • Have we identified any financial and/or wider market failures in this sector, and is the request for funding based on these factors?
  • What are the risks private investors are uncomfortable with in this market?
  • What commercial models are currently available? Who is exposed to risk of failure? Who is willing to absorb risk?
  • Is there an undersupply of capital in this market relative to what is needed to achieve strategic objectives right now?
  • How do we envisage growth in this sector and how is that matched by capital availability?



1 Organisations whom we consulted and policy referenced to date including government departments like BEIS, other Development Finance Institutions, and other Arms’ Length Bodies.
2 UKIB’s framework document defines the operating principle “Additionality: The Company will prioritise investments where there is an undersupply of private sector financing and, by reducing barriers to investment, crowd-in private capital.” p3, HMT 2021.
3 HMT Green Book 2022.

Related information

You may also be interested to read the blog which explains the principle behind additionality and how it plays a crucial part in our investment decision-making. The blog also introduces the Bank’s approach to assessing additionality in our private deals.