Special share to protect GIB’s green mission

Special share to protect GIB’s green missionThe Green Investment Bank (GIB) will create a ‘special share’ in the company to protect its green mission as part of the process to introduce private capital to the bank, the government announced yesterday (2 February).

Following the privatisation of the bank, the special share would be held by a separate company, independent of the GIB and government. The ‘special shareholder’ would then have veto power to block any move away from the GIB’s mission to fund green projects.

The government’s Environmental Audit Committee (EAC) concluded an inquiry into the privatisation of the GIB in December, with outgoing Chair Huw Irranca-Davies MP calling the sale ‘rushed’ and stating that it should not go ahead unless the bank’s original mandate to support environmentally-friendly projects could be protected.

The EAC report recommended that, should the government go ahead with plans to privatise the GIB, it should be sold as a going concern, with the government retaining a minority stake to demonstrate its commitment to the green economy and ensure the bank’s long-term strength.

Handing a share over to an independent company is meant to represent a clear break from governmental control, which the Office of National Statistics has informed the GIB is necessary under European public accounting rules on government ownership and influence over private enterprises.

Keeping bank ‘focused on what it does best’

UK Business Secretary Sajid Javid said: “Moving the Green Investment Bank into private ownership makes sense. If you want it to have access to more capital, to make bigger investments and have a bigger impact in green sectors it is the best course of action.

“To ensure the bank’s green credentials are maintained it plans to put a special share structure in place that protects its green mission and keeps it focused on what it does best.”

Lord Smith of Kelvin, Chair of UK Green Investment Bank, said: “I have always been confident that any new investor in GIB will be strongly committed to our green mission – our commitment to, and expertise in, green investment is the very reason they would be investing in us. That said, I understand the concern among some of our stakeholders over the legislative changes, so I am delighted we have been able to offer them the additional commitment that a special share will bring.”

GIB sale

Launched in 2012 to support environmentally-friendly projects struggling to find funding from the private sector, the bank has to date committed £2.3 billion to 58 projects. However, Javid announced in June that ‘at least a majority’ of the bank would be sold to private investors in order to increase its access to capital and reduce the impact of EU regulations on state aid.

Green groups and think tanks have been critical of the plan, however, warning that the sale would undermine the GIB’s ability to meet its green goals and damage confidence in low-carbon sector investment.

The sale has faced increasing resistance from some quarters, moreover, as ministers were alarmed to learn that any sale to the private sector would necessitate the removal of the statutory lock on its articles of association that currently ensures the bank only invests in green businesses. In order to sell the bank to the private sector, government will have to repeal the lock, though it has said it is “asking bidders to sign up to those green objects in the articles as part of the sale” in addition to now promising a ‘special shareholder’.

More information on the Environmental Audit Committee inquiry into the sale of the GIB can be found on the UK Parliament website.