The Green Investment Bank has been formed in order to fund renewable energy and low-carbon projects. The bank will raise equity for green investing in wind turbine farms, smart grids and other such renewable energy projects. The GIB is focusing on green technologies which are set to provide an increasing number of jobs and related businesses in the UK. The UK is behind its international rivals, and must take action fast. Could green investment banking be the answer to the UK’s needs?
Pro – The green technologies and services market is worth more than $3 trillion per annum. Currently the UK has only around a 5% share of this market. Germany and France have double the market share of the UK. Brazil has created half a million new jobs in green ethanol promotion, and nearly quarter of a million work in Germany in the green investing sector. Green investment banking will help the UK economy recover, and help the UK to move towards a low carbon economy, and meet its responsibilities to the Kyoto treaty.
Pro – Ultimately, if funded properly from the beginning, the GIB will pay for itself many times over. It is an amazing opportunity to raise the funds for projects that are desperately needed in order to tackle climate change.
Pro – There are way too many sources of green funding from the government, which do not coordinate between each other, such as the Carbon Trust, the 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 pounds, with the private sector matching this, but this is now in doubt. Perhaps it will be funded by green bonds and ISAs, and by adding a tax to energy bills. This funding and structuring problem needs to be solved before the bank can function properly.
Con – Until the ideas for the GIB are brought into fruition, investors are not making any moves, but rather just waiting to see how things will work out. The bank has not been clear in what its exact objectives are. It could even become just one more public fund with capital that is under-deployed. The business model of the Green Investment Bank as it stands means that it will unlikely 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 give assistance to high-risk, high-gain green projects that are so far not proven.