The Green Investment Bank has been formed to fund renewable energy and low-carbon projects. The bank will raise equity for green investments in wind turbine farms, smart grids and other such renewable energy projects. GIB is focusing on green technologies which are set to provide a growing number of jobs and related businesses in the UK. The UK is lagging behind its international rivals, and must act fast. Could green investment banking be the answer the UK needs?
Pro – The market for green technologies and services is worth more than $3 trillion per year. The UK currently holds around 5% of this market. Germany and France have double the UK market share. Brazil has created half a million new jobs in green ethanol promotion, and Germany employs nearly a quarter of a million in the green investment sector. Green investment banking will help the UK economy recover, and help the UK move towards a low carbon economy, and meet its obligations under the Kyoto Protocol.
Pro – Ultimately, if funded properly from the outset, the GIB will more than pay for itself many times over. This is a wonderful opportunity to raise money for much needed projects to combat climate change.
Pro – There are lots of sources of green funding from the government that don’t coordinate with each other, such as the Carbon Trust, Energy Technologies Institute and many more. The Green Investment Bank will solve this by consolidating projects and public funds.
Con – There are many unresolved issues with the Green Investment Bank, such as where the funding will come from. The government was going to give £1 billion, with the private sector matching it, but this is now in doubt. Perhaps it will be funded by Green Bonds and ISAs and by adding taxes to energy bills. This funding and structuring problem needs to be resolved before the bank can function properly.
Con – Until the idea for GIB comes to fruition, investors are not taking any action but are just waiting to see how things work out. The bank has not been able to clarify what its exact objectives are. It could also become just another public fund with capital that is meager. As a Green Investment Bank business model this means that it will not be able to deliver large scale investments. The bank really needs to align itself with other providers of financial services, and then it will be able to fund high-risk, high-profit green projects that are yet to be proven.