Green Investment Bank
Encyclopedia
Green Investment Bank is a funding scheme initiated in 2010 by the British
government and assigned the task of attracting private funds for the financing of the British private sector's investments related to environmental preservation and improvement.
, the United Kingdom is legally committed to significantly reducing its carbon emissions by 2050. More importantly, by 2020, a significantly higher percentage of energy generated in Britain must originate from renewable sources
.
A non-partisan, House of Commons committee on climate change
was established to study and recommend ways of meeting the country's obligations. The committee reported that for a new, low-carbon business and government infrastructure to be established, the necessary investment would range between £200 billion and £1 trillion over the next two decades.
The committee further stated that since traditional sources of capital for investment in green infrastructure could not provide even half that amount by 2025, there would be a funding gap that needed to be covered by the state budget.
The Fiscal year 2010 British government budget
contains the first mention of a "green investment bank" scheme, earmarked with £2 billion. Chancellor Alistair Darling
stated that the Labour
government was committed to "to support offshore wind energy" and other forms of alternative energy, which he also billed as "crucial to guiding the country out of recession
".
After the 2010 general election, the newly formed Conservative-Liberal Democrat coalition
government defined its primary economic objective to be the drastical reduction of Britain's debt and yearly deficits. Accordingly, the government sought to create a financing scheme for the environmental investment needs of the country that would be funded mainly by the private sector, including the banks.
remains skeptical after objections to the creation of such a bank were raised by the Treasury, since a Green Investment Bank would "swell the state deficit" as it would appear as a liability on the government's balance sheet.
The plans for the environmental funding scheme have been endorsed by Greenpeace
, whose executive director urged the prime minister to "get personally involved", as well as by a number of similar organisations, such as Transform UK, whose director stated that "the only cost the Treasury should consider is the cost of failure to unleash this institution's massive potential to re-power our economy." Environmentalists have engaged in public demonstrations demanding a quicker implementation of the plans.
characterised the plan as "a short-sighted and wasted opportunity" which would be "throwing good money after bad", and disputed that it would attract the kind of investment needed to "generate green jobs, green industry and a green economy in the UK". An economic study commissioned by WDM and Platform recommended that, instead of creating a new "banking scheme", the government should "transform the [already] publicly-owned Royal Bank of Scotland
into a powerful green investment bank", in the process also "creating 50,000 green jobs".
In May 2011, a former adviser to the government, Jonathon Porritt
, who had been head of the Sustainable Development Commission
, publicly criticised the Coalition's scrapping of a planned rise in aviation tax, its watering down of schemes that promote small-scale renewable electricity and its failure to promote a "green investment bank" with immediate borrowing powers. Mr Porritt claimed he examined 75 policies on which the government had committed itself, finding little or no progress in 55. The government responded that it remains "committed to the environment", but claimed that the economic recession had affected environmental policies..
Nick Clegg
stated that the Green Investment Bank "will begin operating in April 2012", adding that the bank's early targets would be "offshore wind, waste and non-domestic energy efficiency". Clegg added that legislation would "ensure the independence of the institution."
On 24 May 2011, Business Secretary Vince Cable, in addressing the parliament, stated that the bank will become "a key component" of the transition to a "low-carbon economy", which will need "significant investment over the coming decades.” Cable also stated that the GIB will have an initial capitalisation of £3 billion, which "the Government believes will leverage a further £15 billion of private investment".
The same day, the Department for Business, Innovation and Skills
, in a press release containing answers to "frequently asked questions" about the bank, outlined the planned finances of the GIB and its activation in "three phases":
The same day, Secretary Cable unveiled his Department's statement of vision
for the bank. The document was cautiously positive about the prospects of private investment in the environment, in Britain.
would appoint Sir Adrian Montague
, CBE
, chairman of private equity firm 3i
, to lead a team of "independent financial experts" in setting up the Green Investment Bank before it starts work next year. Secretary Cable said that the bank will be initially staffed by up to 100 people tasked with "financing the Coalition's plans for a low-carbon economy".
United Kingdom
The United Kingdom of Great Britain and Northern IrelandIn the United Kingdom and Dependencies, other languages have been officially recognised as legitimate autochthonous languages under the European Charter for Regional or Minority Languages...
government and assigned the task of attracting private funds for the financing of the British private sector's investments related to environmental preservation and improvement.
Origins
Under its environmental obligationsKyoto Protocol
The Kyoto Protocol is a protocol to the United Nations Framework Convention on Climate Change , aimed at fighting global warming...
, the United Kingdom is legally committed to significantly reducing its carbon emissions by 2050. More importantly, by 2020, a significantly higher percentage of energy generated in Britain must originate from renewable sources
Renewable energy
Renewable energy is energy which comes from natural resources such as sunlight, wind, rain, tides, and geothermal heat, which are renewable . About 16% of global final energy consumption comes from renewables, with 10% coming from traditional biomass, which is mainly used for heating, and 3.4% from...
.
A non-partisan, House of Commons committee on climate change
Climate change
Climate change is a significant and lasting change in the statistical distribution of weather patterns over periods ranging from decades to millions of years. It may be a change in average weather conditions or the distribution of events around that average...
was established to study and recommend ways of meeting the country's obligations. The committee reported that for a new, low-carbon business and government infrastructure to be established, the necessary investment would range between £200 billion and £1 trillion over the next two decades.
The committee further stated that since traditional sources of capital for investment in green infrastructure could not provide even half that amount by 2025, there would be a funding gap that needed to be covered by the state budget.
The Fiscal year 2010 British government budget
March 2010 United Kingdom Budget
The March 2010 United Kingdom Budget, official known as Budget 2010: Securing the recovery, was delivered by Alistair Darling, Chancellor of the Exchequer, to the House of Commons on 24 March 2010....
contains the first mention of a "green investment bank" scheme, earmarked with £2 billion. Chancellor Alistair Darling
Alistair Darling
Alistair Maclean Darling is a Scottish Labour Party politician who has been a Member of Parliament since 1987, currently for Edinburgh South West. He served as the Chancellor of the Exchequer from 2007 to 2010...
stated that the Labour
Labour Party (UK)
The Labour Party is a centre-left democratic socialist party in the United Kingdom. It surpassed the Liberal Party in general elections during the early 1920s, forming minority governments under Ramsay MacDonald in 1924 and 1929-1931. The party was in a wartime coalition from 1940 to 1945, after...
government was committed to "to support offshore wind energy" and other forms of alternative energy, which he also billed as "crucial to guiding the country out of recession
Recession
In economics, a recession is a business cycle contraction, a general slowdown in economic activity. During recessions, many macroeconomic indicators vary in a similar way...
".
After the 2010 general election, the newly formed Conservative-Liberal Democrat coalition
United Kingdom coalition government (2010–present)
The ConservativeLiberal Democrat coalition is the present Government of the United Kingdom, formed after the 2010 general election. The Conservative Party and the Liberal Democrats entered into discussions which culminated in the 2010 coalition agreement, setting out a programme for government...
government defined its primary economic objective to be the drastical reduction of Britain's debt and yearly deficits. Accordingly, the government sought to create a financing scheme for the environmental investment needs of the country that would be funded mainly by the private sector, including the banks.
History
In June 2010, the "Green Investment Bank" Commission, after holding hearings, recommended that the government creates an eponymous banking entity within the year. Although banking analysts still expect the scheme to be operational sometime within 2012, there has been no decision by the British government as of yet. Chancellor George OsborneGeorge Osborne
George Gideon Oliver Osborne, MP is a British Conservative politician. He is the Chancellor of the Exchequer of the United Kingdom, a role to which he was appointed in May 2010, and has been the Member of Parliament for Tatton since 2001.Osborne is part of the old Anglo-Irish aristocracy, known in...
remains skeptical after objections to the creation of such a bank were raised by the Treasury, since a Green Investment Bank would "swell the state deficit" as it would appear as a liability on the government's balance sheet.
The plans for the environmental funding scheme have been endorsed by Greenpeace
Greenpeace
Greenpeace is a non-governmental environmental organization with offices in over forty countries and with an international coordinating body in Amsterdam, The Netherlands...
, whose executive director urged the prime minister to "get personally involved", as well as by a number of similar organisations, such as Transform UK, whose director stated that "the only cost the Treasury should consider is the cost of failure to unleash this institution's massive potential to re-power our economy." Environmentalists have engaged in public demonstrations demanding a quicker implementation of the plans.
Criticism
Besides the UK Treasury's objections, there has been criticism for the scheme from environmental and other, non-governmental organisations, as well. The World Development MovementWorld Development Movement
The World Development Movement is a membership organisation in the United Kingdom which campaigns on issues of global justice and development in the Global South....
characterised the plan as "a short-sighted and wasted opportunity" which would be "throwing good money after bad", and disputed that it would attract the kind of investment needed to "generate green jobs, green industry and a green economy in the UK". An economic study commissioned by WDM and Platform recommended that, instead of creating a new "banking scheme", the government should "transform the [already] publicly-owned Royal Bank of Scotland
Royal Bank of Scotland
The Royal Bank of Scotland Group is a British banking and insurance holding company in which the UK Government holds an 84% stake. This stake is held and managed through UK Financial Investments Limited, whose voting rights are limited to 75% in order for the bank to retain its listing on the...
into a powerful green investment bank", in the process also "creating 50,000 green jobs".
In May 2011, a former adviser to the government, Jonathon Porritt
Jonathon Porritt
Jonathon Espie Porritt, CBE, is an English environmentalist and writer. Porritt appears frequently in the media, writing in magazines, newspapers and books, and appearing on radio and television regularly.-Early life and family background:...
, who had been head of the Sustainable Development Commission
Sustainable Development Commission
The Sustainable Development Commission was a non-departmental public body responsible for advising the UK Government, Scottish Government, Welsh Assembly Government, and Northern Ireland Executive on sustainable development....
, publicly criticised the Coalition's scrapping of a planned rise in aviation tax, its watering down of schemes that promote small-scale renewable electricity and its failure to promote a "green investment bank" with immediate borrowing powers. Mr Porritt claimed he examined 75 policies on which the government had committed itself, finding little or no progress in 55. The government responded that it remains "committed to the environment", but claimed that the economic recession had affected environmental policies..
Commencent of activities
On 23 May 2011, Deputy Prime MinisterDeputy Prime Minister
A deputy prime minister or vice prime minister is, in some counties, a government minister who can take the position of acting prime minister when the prime minister is temporarily absent. The position is often likened to that of a vice president, but is significantly different, though both...
Nick Clegg
Nick Clegg
Nicholas William Peter "Nick" Clegg is a British Liberal Democrat politician who is currently the Deputy Prime Minister, Lord President of the Council and Minister for Constitutional and Political Reform in the coalition government of which David Cameron is the Prime Minister...
stated that the Green Investment Bank "will begin operating in April 2012", adding that the bank's early targets would be "offshore wind, waste and non-domestic energy efficiency". Clegg added that legislation would "ensure the independence of the institution."
On 24 May 2011, Business Secretary Vince Cable, in addressing the parliament, stated that the bank will become "a key component" of the transition to a "low-carbon economy", which will need "significant investment over the coming decades.” Cable also stated that the GIB will have an initial capitalisation of £3 billion, which "the Government believes will leverage a further £15 billion of private investment".
The same day, the Department for Business, Innovation and Skills
Department for Business, Innovation and Skills
The Department for Business, Innovation and Skills is a ministerial department of the United Kingdom Government created on 5 June 2009 by the merger of the Department for Innovation, Universities and Skills and the Department for Business, Enterprise and Regulatory Reform .-Ministers:The BIS...
, in a press release containing answers to "frequently asked questions" about the bank, outlined the planned finances of the GIB and its activation in "three phases":
- Incubation (April 2012 until state approval): Government makes direct financial investments in the "green economy".
- Establishment (after state approval): Green Investment Bank is established as a "stand-alone institution".
- Full borrowing powers (ca. 2015-16): Bank is given powers to borrow, "subject to public sector's net-debt falling as a percentage of GDP".
The same day, Secretary Cable unveiled his Department's statement of vision
Strategic planning
Strategic planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy. In order to determine the direction of the organization, it is necessary to understand its current position and the possible avenues...
for the bank. The document was cautiously positive about the prospects of private investment in the environment, in Britain.
Management
On 25 May 2011, the Business Secretary informed the House of Commons that the BISDepartment for Business, Innovation and Skills
The Department for Business, Innovation and Skills is a ministerial department of the United Kingdom Government created on 5 June 2009 by the merger of the Department for Innovation, Universities and Skills and the Department for Business, Enterprise and Regulatory Reform .-Ministers:The BIS...
would appoint Sir Adrian Montague
3i
3i Group plc is a multinational private equity and venture capital company headquartered in London, United Kingdom. It has offices in 13 countries across Asia, Europe and the Americas and had total assets under management of £12.7 billion as at 31 March 2011...
, CBE
CBE
CBE and C.B.E. are abbreviations for "Commander of the Order of the British Empire", a grade in the Order of the British Empire.Other uses include:* Chemical and Biochemical Engineering...
, chairman of private equity firm 3i
3i
3i Group plc is a multinational private equity and venture capital company headquartered in London, United Kingdom. It has offices in 13 countries across Asia, Europe and the Americas and had total assets under management of £12.7 billion as at 31 March 2011...
, to lead a team of "independent financial experts" in setting up the Green Investment Bank before it starts work next year. Secretary Cable said that the bank will be initially staffed by up to 100 people tasked with "financing the Coalition's plans for a low-carbon economy".
External links
- Department for Business, Innovation and Skills official website
- Environmental Audit Committee inquiry into Green Investment Bank from the British Parliament website, 27 October 2010