There’s been talk of the Green Investment Bank for a significant amount of time – it’s enshrined in the Coalition Agreement of 2010 and it’s wheeled out every time a government minister gets a challenge on how we will grow the green economy. So it’s appropriate that after the government signs up to even more stringent carbon emissions it finally starts to flesh out the proposal for the Green Investment Bank.
Monday 23rd saw Climate Change Capital host an Event called “Creating a Sustainable Economic Recovery” at which Deputy Prime Minister Rt. Hon. Nick Clegg MP gave more details of what the Green Investment Bank might look like. The plan is fairly straightforward insofar as it will be established by legislation as an independent, enduring institution, be capitalised with £3billion of government funds and making investments by April 2012, with the ability to borrow in April 2015.
Listening to the Deputy Prime Minister on Monday, I was struck by a couple of things. Firstly, the fact that there was such a senior member of government launching this kind of institution does indeed give confidence that this isn’t some kind of “by the way” project of this administration. The second, that the idea of a Green Investment Bank, now so much used in common parlance in the industry, really did seem unthinkable not that many years ago. Thirdly, that £3billion in austere times is not to be sniffed at even if it is a mere drop in the ocean of what will be needed.
But the main thing that struck me was the lack of detail, the lack of ambition and the lack of vision. There is a real risk that an institution such as this could just become a “soft” option, funding projects which frankly should be capable of being funded by commercial debt. If the future is to be green, then every investment bank needs to be a green one. Nick Clegg talked about the Green Investment Bank funding offshore wind projects. Admittedly, offshore wind carries risk, but is it really risk that cannot be funded by commercial banks in the same way that they got comfortable funding offshore oil and gas and pipelines? Will the Green Investment Bank offer more competitive lending rates than “traditional” banks would? If so, then let’s see what impact it will have but that wasn’t the message with which I left Monday’s event.
What we need the Green Investment Bank needs to do is act as a leader in the financing of green projects that really are cutting edge – technology or companies that might not tick all the boxes for the commercial banks’ credit committees. If the government’s self-imposed targets (a good thing) are to be met, then financial institutions including the Green Investment Bank need to show some vision and some ambition. Otherwise, when we miss the targets we’ve set ourselves, we’ll be doing a post mortem of what might have been had we had the vision to invest in genuinely innovative routes.
I’m not sure that a banking institution created by legislation and funded for at least 3 years by Treasury is really the type of institution that will be comfortable with taking financial risks on innovative projects. However, as the potential consequences of failing to take risks could be significantly greater than any of us know, I genuinely hope it proves me wrong.
