Sustainability

Macquarie completes controversial acquisition of Green Investment Bank

The government has confirmed that the sale of the UK Green Investment Bank (GIB) to Australian investment firm Macquarie Group has been fully completed in a £2.3 billion deal, renaming it the Green Investment Group (GIG). 

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The GIB was created by the government in 2012 to support green infrastructure that would struggle to find support on the open market in the UK.

In a statement released this morning (18 August), the Department for Business, Energy & Industrial Strategy (BEIS) said: “The £2.3 billion deal ensures that all the taxpayer funding invested in GIB since its creation, including set-up costs, has been returned with a gain of approximately £186 million.”

The government claims that moving the bank into the private sector will “free it from the constraints of public sector ownership” and allow it to operate internationally. The company’s renaming was driven by a desire to make more overseas investments and avoid the legal issues of using the term abroad

The promised ‘special share’ in the bank also comes into play now - a share held by a company independent of both the government and Maquarie, designed to protect the bank’s green mission. This was bought by the Green Purposes Company Limited, from which five independent trustees have the power to approve or reject any proposed changes to GIG’s green purposes in the future.

The government will also continue to hold an interest in a portfolio of a small number of GIG’s existing green infrastructure investments. These assets will continue to be managed by GIG until they are eventually sold off.

The privatisation process of the bank - which began in June 2015 - has been a lengthy and difficult process, facing fierce opposition from MPs and environmental groups as well as a legal challenge.

Given the stated commitment of the GIG to uphold the GIB’s support for green investment projects, many are keen for the group to put its money where its mouth is, with Nick Molho, Executive Director of the Aldersgate Group - an alliance of business, political and civil society leaders pushing for a sustainable economy - saying: “Following the successful completion of the sale of the GIB today, we call on the new Green Investment Group (GIG) to honour their commitment to support investment in the UK’s renewable energy infrastructure. The GIG is ideally placed to lead private sector investment in UK green infrastructure projects and help deliver key government policy commitments such as those that will be set out in the upcoming Clean Growth Plan.”

“Delivering the government’s ambitions under the Clean Growth Plan and 25 Year Environment Plan will require supporting novel technologies and business models which may initially struggle to access finance. Now that the sale of the GIB is complete and given that the UK’s access to funds from the European Investment Bank is likely to be more restricted after Brexit, the government needs to develop a clear finance strategy in the near future.

This strategy should aim to crowd in private sector investment in the new technologies and business models the UK will need to deliver on its environmental commitments and build a thriving low carbon economy.”

The controversial sale of the GIB

Since its creation in 2012, the GIB has been committed to expanding green infrastructure, spending £3.4 billion on projects with most of the investment in the waste industry going to incinerators and other Energy-from-Waste facilities. 

Macquarie completes controversial acquisition of Green Investment Bank
Keith Brown, Scottish Cabinet Secretary for the Economy, said the sale of the GIB to Maquarie was 'deeply troubling'

It was then announced in 2015 by the then-Business Secretary Sajid Javid that the bank would be sold off to private investors, with the stated intention of increasing the bank’s access to capital and reducing the impact of EU regulations on state aid.

This evoked fears from many that the bank’s green mission would be lost, with the Parliament’s cross-party Environmental Audit Committee (EAC) claiming that the sale ‘was rushed’ and should not go ahead unless the bank’s original aim to support environmentally-friendly projects could be protected.

In response, Javid announced that a ‘golden share’ would be created to protect its green credentials through a veto power to block any move that contradicted the bank’s purpose.

The news that the bank would be sold to Australian firm Macquarie attracted even more criticism, as the firm has a reputation for asset stripping. Most notably, the company sold off Thames Water last year after investors reportedly banked profits in foreign accounts and dramatically cut the amount of taxes paid by the company.

Critics included the Scottish Economy Secretary, who called the prospect of the firm taking over the GIB ‘deeply troubling’ and said that the process was more akin to ‘fragmentation or asset stripping.’

In a similar vein, EAC Chair Mary Creagh MP noted in January when Maquarie emerged as the preferred buyer: “The GIB should continue to exist as a low-carbon investor or its sale should not proceed. Ministers have rushed to privatise the bank without consultation or proper consideration of the alternatives. Taxpayers do not want to see a repeat of the Royal Mail debacle where public assets were sold at bargain basement prices, and they do not want to see a landmark British institution sold off to an asset stripper.”

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