Uk Green Investment Bank

The Parliamentary Information Office has been monitoring progress towards the set up and implementation of the UK Green Investment Bank following the Energy Act last year

The UK is to set up the world’s first investment bank solely dedicated to greening the economy.

The initiative is part of the Government’s commitment to setting the UK firmly on course towards a green and growing economy, while also delivering long-term sustainable growth.

This transition to a green economy presents significant growth opportunities for UK-based businesses, both at home and abroad.

It will require unprecedented investment in key green sectors - an estimated £200 billion is needed for the energy system alone over the period to 2020.

The UK Green Investment Bank (GIB) will be a key component of the progression towards a green economy, complementing other green policies to help accelerate additional capital into green infrastructure.

Its mission will be to provide financial solutions to accelerate private sector investment in the green economy.
Capitalised with £3 billion, the GIB will play a vital role in addressing market failures affecting green infrastructure projects in order to stimulate a step up in private investment.

It will build the necessary deep expertise in financial markets and green investments, working towards a ‘double bottom line’ of both achieving significant green impact and making financial returns.

Following best practice, the UK Green Investment Bank has been established under the Companies Act and will operate at arm’s length from government.

The Government expects to obtain state aid approval for the GIB by autumn 2012. In advance of this, the Government will begin making investments in green projects from April 2012.

The GIB is one of a number of key policies designed help meet environmental objectives and promote economic growth. Other initiatives include the creation of a National Infrastructure Plan, reforms to the electricity market, changes to the climate change levy, the introduction of a renewable heat incentive, the review of waste policy and the reviews of Ofgem and Ofwat.

Several non-green specific policies also support our growth and environmental objectives, including banking reform, support for early stage innovation and skills provision.

Delivery schedule

The UK Green Investment Bank project will evolve over two phases, preceded by a programme of preliminary Government investment in green infrastructure.

• Preliminary phase: UK Green Investments – from 2012 until state aid approval for GIB is granted, BIS’s UK Green Investments team will make direct investments in green infrastructure projects
• GIB establishment – GIB will be established as a stand-alone institution following state-aid approval. It is expected that state aid approval will be granted by autumn 2012
• GIB full borrowing – from April 2015, the GIB will be given full powers to borrow, subject to public sector net debt falling as a percentage of GDP and further state aid approval being granted.

Project Governance

The Department of Business, Innovation and Skills is leading the Government’s work to develop the UK Green Investment Bank. It is working with a number of other government departments including the DECC, DEFRA, HMT, DfT, CLG and Infrastructure UK.

And in May this year the UK Green Investment Bank (UK GIB) moved a step closer to going live. The Business Secretary announced the formation of the public company and the appointment of its top directors.

Lord Smith of Kelvin will be the new Chair of UK Green Investment Bank plc. Currently Chair of SSE and The Weir Group, he has a strong financial services background, chairing the group set up by the Financial Reporting Council in 2003 to clarify the role of audit committees.

Sir Adrian Montague has been appointed as Deputy Chair and Senior Independent Director. Sir Adrian, who is chair of companies including 3i and Anglian Water Group, has been chairing the GIB Advisory Group and has been closely involved with the development of the bank.

Business Secretary Vince Cable said:

"The UK GIB is a major new innovation vital to securing investment in what is one of the great challenges of our age, the decarbonisation of our energy supply. It has found two candidates of outstanding calibre well suited to leading the bank through its important early phase."

Lord Smith said:

“It is a pleasure to be asked by the Business Secretary to chair this groundbreaking institution. I look forward to working with Sir Adrian Montague and can’t wait to get started.”

Deputy Prime Minister Nick Clegg said:

"Lord Smith and Sir Adrian bring significant expertise and strong track records of delivery. Britain is already a powerhouse in green industries, but we are still not tapping all of our potential. I am determined that the Government will do everything it can to support this burgeoning sector and set the UK firmly on course towards a green and growing economy. The UK GIB will play a key part in this."

Scottish Secretary Michael Moore said:

“The UK GIB is set to play an essential part as we build and invest in a greener future. This is a UK institution headquartered in Edinburgh supported by a strong team in London and the news that Lord Smith and Sir Adrian Montague have been appointed is another step towards the bank opening for business. They bring a wealth of experience to the roles and will bring that to bear as we look to encourage private sector investment in key energy projects.”

The will begin the recruitment of the company’s other directors and senior executive team shortly. The Board is aiming for a fully operational UK GIB this autumn, subject to state aid approval from the European Commission.

Following these appointments, the Advisory Group chaired by Sir Adrian Montague will be disbanded.

The UK GIB headquarters will be in Edinburgh, with an office in London to enable a greater commercial reach nationally than could be achieved from one location.

The Enterprise and Regulatory Reform Bill includes legislation to set the Bank’s green purpose, embed its independence and make funding provision for the Bank.

The Parliamentary Information Office will continue to report on environmental issues and their impact on the UK as we go through the months ahead.