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The Green Investment Bank – the lowdown

Having stood strong through the Labour-coalition shift and deficit-reducing cuts, one key green policy with an interesting potential is about to become operational – the Green Investment Bank (GIB). 

With offices and teams set to be in place by the end of this year (and the headquarters’ location being fought over currently), the Government’s department for Business Innovation and Skills (BIS) says the GIB could start lending as soon as September 2012.

What’s the big idea?

The GIB is essentially aimed at providing equity and debt funding for green companies and technologies to support the UK’s transition to a low-carbon economy. Such companies are often considered risky by investors and find it difficult to get private finance.

The bank forms part of a bundle of policies to promote green growth and infrastructure improvement in the UK.

In its initial stages, it will be supported by £3bn from the Government, before becoming stand-alone in 2015. This plan is, however, subject to a fall in net public sector debt – something that some financial forecasters doubt will be achieved.

Who’s set to win?

Funding will initially be focused on late-stage, established green technologies and infrastructure with an eye on financial return, namely offshore wind, non-domestic energy efficiency and waste projects.

Increased investment in other technologies, such as renewable heat and carbon capture and storage (CCS), will be implemented later.

Riskier Business

Some green-tech advocates are demanding more innovative investments from the bank. Rather than rely on old-news green technology they say the GIB should also look to suppourt embryonic ideas that find it particularly hard to get funding elsewhere.

Debate also rages over the exact product range that the bank will have on offer. Loan forms? Credit enhancement products? The combined business acumen of the new advisory body should ensure that the bank puts on a well-designed spread.

In sum

The GIB represents a solid approach to distributing catalytic green funding. Moves such as this by the government represent ambitious steps in the face of deep cuts elsewhere.

Its effectiveness will rely heavily on where funds are directed initially. Not only must financial returns on GIB investment be made, but tangible emissions reductions too – the choice of projects that receive funds is crucial. Furthermore the exact mechanisms for delivering funds must be sensibly tailored to support the growth of companies that can then dominate the green economy worldwide.


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