FAQ
Questions which are frequently asked about the Green Investment Bank
The bank has been formed as a public company called UK Green Investment Bank plc. We expect the bank to be fully operational in the autumn, subject to obtaining state aid approval.
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The Government has made available £775 million for investment in green infrastructure from April 2012 to March 2013.
All government investments must comply with EU state aid rules. Consequently the Government investments made by UKGI in advance of the GIB will need to be either:
- made on a commercial basis on the same terms as other private investors (and therefore not state aid), or
- fall within existing state aid exemptions.
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The initial funding for the bank will be £3 billion to 2015. Catalysing private sector capital is central to the bank’s remit. The GIB will focus not only on investing £3 billion in projects which demonstrate ability to make a positive commercial return and green impact, but also on building the necessary deep expertise in financial markets and green investments to mobilise additional capital into a wide range of green infrastructure.
The bank is part of a much broader set of measures to move to a green UK economy, including for example the renewable energy obligation, the EU Emissions Trading Scheme, and the climate change levy. The combined package of measures is designed to unlock the high levels of investment needed in order set the UK firmly on course towards a green and growing economy.
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The initial strategic priority sectors for the bank to 2015 are offshore wind, commercial and industrial waste, energy from waste, non domestic energy efficiency, and support for the Green Deal. Subject to state aid clearance, at least 80% of the funds committed by the bank over the Spending Review period will be invested in these priority sectors. Up to 20% of the funds may be committed to other green sectors.
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Up to 20% of the GIB’s funds may be committed outside the priority sectors, include areas such as marine and carbon capture and storage (CCS). As the Government stated in May 2011, the list of green sectors the bank may invest in includes nuclear. This is all subject to state aid approval.
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The selection of the initial five priority sectors was made against the criteria of green impact; additionality; and capacity for commercial investment in mature infrastructure over the period to 2015. An additional factor was the importance of complementing, and not duplicating, other Government policies including other financial support.
As a relatively early-stage technology compared with other green sectors, marine energy displayed relatively low commercial investability in mature infrastructure within the time frame considered. Other government policies and finance initiatives are focused on prioritising financial support for marine energy at its current stage of development.
However, while at least 80% of the funds committed by the Bank over the period to 2015 will be invested in these priority sectors, the remaining 20% will be invested in green sectors that the Board considers appropriate. This could include the marine energy sector. All potential investments will be assessed by the Bank against green impact, sound finances and additionality.
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The focus of GIB will be investing in green infrastructure projects and leveraging in private sector finance. All investment opportunities will be assessed against three key criteria - sound banking principles, ability to mobilise additional private sector capital, and green impact.
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Individual investment decisions will be taken by the company’s Investment Committee.
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Legislation provides that the bank will always have a green purpose clause, embeds its independence, and makes funding provision in respect of it. Legislation is also important to ensure that the bank will continue to accelerate private sector investment in the UK’s transition to a green economy over the longer term.
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The headquarters will be located in Edinburgh, with a London office. This arrangement will enable a greater commercial reach nationally than could be achieved from one location. It will also play to the strengths of Edinburgh and London, supporting the Government’s ambition for the bank to become a world leader.
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The Green Investment Bank is being funded to the extent that it will not need to borrow before 2015. After that it will be given borrowing powers if the targets for reduction in national debt are being met.
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The process for recruitment of the Chair and Senior Independent Director is underway, with a view to making appointments shortly. We are seeking to have the bank fully operational this autumn, subject to state aid approval.
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The Government is paving the way for the establishment of the UK Green Investment Bank by making investments in green infrastructure, on commercial terms, from April 2012. More detail can be found on the UK Green Investments (UKGI) webpage, or by contacting the UKGI team: UKGI@bis.gsi.gov.uk
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