Thursday, 18 December 2014
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Green Investment Bank will unlock funding for innovators

Firms developing high-risk technology would receive more money than through current funding models under proposals for a green investment bank published today.

The independent Green Investment Bank (GIB) Commission has recommended public money be taken from nine different funds and quangos, including the Carbon Trust, and managed by a single body in order to cut inefficiency and reduce bureaucracy.

The commission, led by former European chairman of Merrill Lynch Bob Wigley and set up by the Conservatives last year, proposed the GIB would include a banking division to encourage retail investment in low-carbon technology through green bonds and ISAs.

A UK Fund for Green Growth would operate as a separate arm within the GIB and comprise the £2.1bn from existing environmental funds, as well as the £185m a year investment budgets of the Carbon Trust, the Energy Technologies Institute and the low-carbon arm of the Technology Strategy Board.

Although the GIB’s priorities should be investing in proven areas with the biggest and fastest impact, such as energy efficiency projects and off-shore wind, a separate growth fund would allow continued focus on new technology, said Nick Mabey, GIB Commission member and chief executive of E3G.

‘By having more financial expertise and a bigger balance sheet, the GIB will be able to make better and larger investments than the plethora of underfunded and somewhat tokenistic organisations that exist now,’ he told The Engineer.

‘The Carbon Trust, for example, does some very good work in innovation but it doesn’t have enough money. It’s hampered by its size and scale and can’t raise the necessary money from the market.’

Although the commission shied away from calling for the quangos to be scrapped altogether - and the government said it must digest the report before making any decision - the Carbon Trust moved quickly to highlight its efforts to raise private investment.

Carbon Trust chief executive Tom Delay said: ‘On the same day the Wigley report was published, the Carbon Trust has announced that seven major energy companies are investing millions into our offshore wind technology accelerator to cut the cost of offshore wind by 10 per cent.’

The Environmental Industries Commission warned that a GIB could ‘institutionalise a narrow understanding of the economic opportunities of “green investment”’ and that it would ‘only be as successful as the environmental policy framework that underpins it’.

But Steve Mahon of investment firm Low Carbon Accelerator said the plans would increase the number of private sector firms willing to invest in new technology.

‘If the government is willing to take on a lot of the risk then other firms are more likely to come in,’ he told The Engineer. ‘This could catalyse more money to flow into high-risk, high-reward, early-stage projects.’

‘But what we don’t want is another quango competing with or crowding out the private sector. Money should be distributed between individuals in the private sector who can leverage more funding.’

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