The battles over a UK Green Investment Bank

It looks like the UK government will create a  Green Investment Bank. But there are battles to come, as everyone wants it to deliver on their favoured area – at least, that is my take from last night’s Aldersgate Group event.

There are many financial barriers to the transition to a low-carbon economy. Most technological transitions happen because an old platform (eg steam trains) has diminishing returns which make exploring a new platform (cars) worthwhile. But we’re trying to do this ‘early’ when it comes to the move to a low-carbon economy: non-renewable energy would probably have decades to run if it wasn’t for this pesky problem of putting the prosperity of billions at risk. One mechanism is to invent a Green Investment Bank which can reduce the risk to investors, and so reduce the costs of the transition for us all.

Last night’s excellent Aldersgate Group event showed how much progress there has been in getting a Green Investment Bank to happen in the UK government. There is a consensus on the need from the private sector and the policy wonks. The government announced an intention to create one in the Comprehensive Spending Review (see here).

But battles remain. There are all sorts of rumours that the Treasury is fighting a rearguard action to make the bank into a fund – which would vastly reduce its ability to leverage in private capital or not an independent institution, which would expose it to the very political and regulatory uncertainties that a Green Investment Bank is supposed to overcome. Last night the Permanent Secretary from the Department for Business, Innovation and Skills (BIS) spoke as if all these battles had finished. Let’s hope so.

For me the event last night  brought out two further battles: speed and focus. The CSR announcement commits the Coalition Government to having the £1bn in place by 2013/14  – which feels a long way away. The Perm Sec hinted that government asset sales might provide capital earlier. As I mentioned in an earlier post, The Met Office publication on Informing Choices last year said we need to have a peak of global emissions in 2020 and 5% reduction each year to stand a 50:50 chance of avoiding dangerous climate change. There was lots of expressed concern on speed in the hall.

My own concern was more about focus. At one point the Aldersgate Group chair said a public bank should have a public mission and so must also address – and I confess I couldn’t write them down fast enough, so I may have got the specifics wrong – rural development, the balance of the economy, competitiveness, high-tech manufacturing and more. Others with questions from the floor wanted the bank to focus on providing venture capital, corporate financing, community investment,  infrastructure and more.  Everyone wants the bank to deliver on their favoured area.

Any organisation that has 5+ foci does not have focus. There is a great risk of forcing the bank to solve all problems, and so solving none. Surely creating a lower risk, higher return path to a low-carbon economy is public mission enough.

The next battle is going to be defining a focus which gives bang for buck (for effectiveness) and quick wins (for credibility). The heavy implication last night was that the focus at first would be infrastructure. Lots of people are going to be disappointed.


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