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UK's Green Investment Bank moves nearer to launch

By Julian Jackson - 16 Jun 2011 17:19:0 GMT
UK's Green Investment Bank moves nearer to launch

The UK government is backing a Green Investment Bank, which will have £3 billion ($4.86 billion) to invest in green technology. The British government department responsible says on its website:

"The GIB's mission will be to accelerate private sector investment in the UK's transition to a green economy. It will play a vital role in addressing market failures which are holding back private sector investment. Sectors likely to be eligible for intervention initially include offshore wind, non-domestic energy efficiency and waste. Work is ongoing to explore other sectors which will change over time."

On Monday the Aldersgate Group - a coalition of progressive businesses - held a summit at Bank of America Merrill Lynch in London to investigate how the bank's setup was progressing.

In attendance was the minister responsible, Lord Green, and a selection of financial experts on a panel chaired by the Financial Times political correspondent Elizabeth Rigby. Lord Green said that the GIB was a very important initiative which was needed because of the high risk factor for companies investing in developing technologies in a market where costs and returns might be spread over a long period of time. He said, "We need to build a very strong British capability in renewable energy, and in all the other various green technologies, which will mean that we will build a world-leading competence which will benefit our own exporting and investment performance."

Some of the panelists (L-R): Peter Young, Aldersgate Group; John Jenkins, GE Capital UK; Lord Green, Minister of State for Trade and Investment; photo by Nina Raingold

Some of the panelists (L-R): Peter Young, Aldersgate Group; John Jenkins, GE Capital UK; Lord Green, Minister of State for Trade and Investment; photo by Nina Raingold

The question was raised was £3 billion enough money, in context of a projection that the electricity generation industry would need £200 billion over the next few decades to renew its systems; the expectation is that the GIB would be one of a number of methods of raising capital for green projects and technologies.

The bank is expected to make its first investments in April 2012, ahead of reaching its full capability in succeeding years. Peter Young, Chairman of the Aldersgate Group applauded the urgency, and hoped that the GIB "would be a bridge between capital and the complex areas of technology which can be high risk, but are also fabulous opportunities for the future".

Lord Green stressed that the GIB was expected to be financially successful and return a profit on any investments it makes, like any other bank.

Various questioners brought up the issue of whether the bank was going to be able to support - either financially or with expertise and advice - medium scale and community projects which often fell into a middle ground between micro projects like PV on a single roof, and giant ones like offshore wind farms, and so had great difficulty finding appropriate funding. Lord Green agreed that this was the sort of "market failure" he was talking about and expected that the GIB's advisory teams would be looking at this area to ensure that these sort of projects could be supported.

Lord Green summarised by saying that the GIB was not a purely commercial enterprise, but would have a social role too. He hoped that this ambitious project would become a "centre of expertise which is of benefit to not just government, but investors, capital markets and technology companies as well."

The GIB is obviously an unfolding story. It will be interesting to see if it can deliver investment to kick-start a green revolution in areas where invention and innovation has languished through lack of access to finance.

Top montage by Julian Jackson

Links:

BIS - Green Investment Bank

Aldersgate Group