GIB privatisation risks explored

The Green Investment Bank (GIB) could help restore investor confidence in green projects, but only if it isn’t ‘paralysed by the privatisation process’, according to speakers at an event hosted by the Aldersgate Group, a group of figures from business, politics and civil society that drives action for a sustainable economy.

The event was organised to explore the risks and opportunities presented by the proposed privatisation of the GIB.

The conference followed a statement from Secretary of State for Business, Innovation and Skills Sajid Javid, released on 15 October, providing an update on plans to move the GIB into private ownership.

Former Business Secretary Vince Cable originally launched the ‘world’s first investment bank dedicated to greening the economy’ in November 2012, to support environmentally-friendly projects struggling to gain funding from the private sector.

In the statement Javid explained that privatisation would ‘allow the bank to access a much greater volume of capital than would be the case if GIB were to remain in government ownership’ but did promise that it would continue to invest in green sectors, ‘mobilising more private capital and further accelerating the transition to a green economy’.

After green groups and think tanks criticised the move, warning that it would undermine the GIB’s ability to meet its green goals and damage investor confidence in the low-carbon sector, an inquiry into the future of the GIB was launched by the Environmental Audit Committee (EAC).

‘Botched’ privatisation process could damage investor confidence

Speaking at the event, Nick Mabey, Chief Executive of E3G, a non-profit organisation promoting sustainable development, criticised the “rushed and botched privatisation process”. He said: “The government is now aiming to reset energy policy and try to undo some of the damage that it’s done to investor confidence.” He added that the GIB can play a vital role in restoring confidence, but “not if it is paralysed by a privatisation process”.

He warned that selling the bank to private owners would threaten the UK’s access to £315 billion in the European Fund for Strategic Investment and risked investment staying away from new areas. Instead, he emphasised, the government should not listen to investor trepidation and must lead them to areas such as low-carbon investment: “It’s about the frontier and the GIB was meant to drive that frontier.”

Labour MP Iain Wright, Chair of the BIS Select Committee, presented the event’s keynote, suggesting that actions like privatising the GIB lead to the conclusion that the government is passing up any desire to lead in the global low carbon economy.

He said that the “remarkably mature” bank has, in its first three years, established itself as the largest renewable fund in the UK, currently standing at £818 million. It has, in its public guise, he said, maintained a “balance of business and investment acumen with a green ethos and commitment to environmental concerns” and “provided confidence in what remains to be a forward moving, evolving and stuttering part of the new global economy”.

However, without the legislative protection designed to safeguard the GIB as a public asset, he warned that it could become “just another bank”, under pressure “to relinquish that green distinctiveness in order to pursue profits and returns to shareholders and investors”.

Privatisation will not affect ‘purpose and activities’ of bank

There was some defence of privatisation among the speakers, however. Bob Wigley, former Chair of the Green Investment Bank Commission, said that the “purpose and activities of the bank are well established and likely to continue in the same vein” regardless of privatisation. He noted that by selling off the GIB to private owners, its capital base will be enlarged, allowing it to borrow.

Allan Vlah, Fund Manager at Aviva Investors, which has committed to investing more than £500 million annually in renewable energy and energy efficiency, emphasised that the privatisation process does not necessarily eliminate the GIB’s ‘unique positioning’ in the market. He did, however, suggest that dramatic changes in government policy in the last several months, chiefly cuts being made to subsidies for renewable energy, could undermine investor confidence in a number of technologies and sectors.

Learn more about the GIB’s interventions in the waste sector.