Government

MPs criticise sale of Green Investment Bank

The Green Investment Bank (GIB) ‘failed to live up to’ its green ambitions and there is little guarantee that it ever will, according to a report by the House of Commons Public Accounts Committee (PAC) released today (14 March).

MPs criticise sale of Green Investment BankEstablished in 2012, the GIB was a non-departmental body of the Department for Business, Energy & Industrial Strategy (BEIS) intended to address a lack of private investment in the green economy. The GIB provided public investment (and encouraged private investment) in green infrastructure projects such as offshore wind and waste and bioenergy, and by March 2017, had committed £3.4 billion to 100 projects, along with attracting £8.6 billion of private capital. Over 90 per cent of the Bank’s waste sector investment went to energy-from-waste projects.

Only three years after the launch it was announced that the GIB would be sold off to private investors to increase its access to capital, a sale that was completed in August 2017 for £1.6 billion to Australian investment firm Macquarie Group, who rebranded the company as the Green Investment Group (GIG).

The controversial sale process was opposed by MPs and environmental groups amid fears that it would damage low-carbon investment, with Parliament’s Environmental Audit Committee (EAC) warning at the time that the process was being ‘rushed’. This was corroborated in December 2017 by a report from the National Audit Office, which stated that the Bank could have been worth more if the government had waited longer for a sale.

The EAC also warned that the sale should not go ahead unless the GIB’s environmental aims could be properly safeguarded, and the PAC’s report now claims that there is ‘no guarantee’ that the GIB will ever live up to these aims because ‘its green intentions are not sufficiently protected.’ In addition, the report accuses the government of choosing to sell the GIB before fully assessing its impact, prioritising the reduction of public debt over the delivery of the organisation’s green objectives.

Sale 'deeply regrettable'

PAC Deputy Chair Sir Geoffrey Clifton-Brown (Conservative MP for the Cotswolds) commented: “Government set up the GIB to grow investment in the green economy and thus help the UK meet its climate change obligations. The manner in which it was sold off is therefore deeply regrettable. Government did not carry out a full impact of the Bank’s impact before deciding to sell, nor did it secure adequate assurance over the Bank’s future role.”

MPs criticise sale of Green Investment Bank
The Green Investment Group has interests in six UK offshore wind farms
The new report claims that BEIS did not have the proper criteria or evidence to judge whether the Bank was achieving its intended green impact and adequately addressing failures in the green energy market. PAC has called for BEIS to introduce an evaluation framework for all companies it creates, ensuring that evaluations are continuous, refer to the original policy objectives and are published before decisions are made about a company’s future.

In addition, the report argues that measures put in place by BEIS to ensure the GIB is an ‘enduring institution’ are not sufficient. The government repealed legislation protecting the GIB’s investment in the green economy in order to ensure that the GIB would be fully removed from the public sector balance sheet following the sale.

Although a ‘golden share’ was created, to be owned independent of GIG and the government by a Green Purposes Company with the power to veto changes made to the GIB’s green aims, this group has no control over GIG’s investments and the government did not require bidders to make legally binding commitments to the GIB’s aims. In response, PAC has asked that the government secure binding commitments to company aims from buyers when selling public assets.

While GIG has stated its own commitment to uphold the initial ambitions of the GIB, it is unclear as to to whether the Macquarie-owned company will continue to support the government’s energy policy or climate change goals. Clifton-Brown added: “This was a UK initiative but the rebranded GIG is not bound to invest in the UK’s energy policy at all, nor to invest in the kind of technologies that support its climate objectives.

“It was a mistake to repeal legislation protecting the GIB’s green investment obligations without securing firmer commitments from potential buyers. Macquarie told us such commitments did not affect the price it was prepared to pay, indicating the government could and should have strengthened these commitments contractually.

“We expect the government to keep us updated on GIG’s future activities in the UK but there are broader lessons here – not least for how government evaluates public assets and, where relevant, prepares them for sale.”

PAC has asked the government to produce a detailed explanation of GIG’s UK activities and performance by 31 December 2020, looking at the Group’s impact on UK climate goals, the effectiveness of the Green Purposes Company and any actions taken by GIG counter to its stated intentions on completion of the sale.

The full PAC report on ‘The sale of the Green Investment Bank’ can be found on the Parliament website.

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