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The Westminster Sustainable Business Forum (WSBF), a coalition of business leaders from across UK industry, calls on the government urgently to finalise its plans for a Green Investment Bank (GIB).
In a submission to the chancellor and the secretaries of state for business, and energy and climate change, the Forum calls on the government to define the remit of the bank and its level of independence, and confirm its strategy for the initial capitalisation of the bank.
A series of market failures currently inhibit sufficient investment in low- and zero-carbon projects. Investment in the low-carbon economy is necessary to achieve the government's emission reduction targets for 2020 and 2050. The lack of funds for SMEs constrains their ability to invest in low-carbon technology. Large-scale projects also face market investment limits, and the lack of available funds constrains both business types.
The submission makes a series of recommendations to government for the successful establishment of a Green Investment Bank. The bank must be established as an institution largely independent of government, to ensure that it is free to operate within the market. In order for the GIB to attract private capital it needs to have a certain level of independence from government policy, as corporate and private investors need certainty to reduce their investment risk.
The GIB should not compete with, but encourage private sector investment. This measure would restrict the independence of the GIB, which should only invest when funding from private investors is not available. The GIB should act as co-investor for private companies, and not as sole investor, save in scenarios where no private investment solution exists, e.g. for early-stage investment.
The submission warns against combining funding from quasi non-governmental organisations (quangos) as a method of initial capitalisation for the GIB, as this is likely to trigger a lengthy debate that would delay the creation of the GIB.
The submission also highlights the need for government to give due consideration to the potential difficulties for a Green Investment Bank in addressing two separate market failures. The GIB is set to address both the lack of debt and equity funding (because of the large risks involved in large-scale, low-carbon infrastructure projects), and the lack of funding for early-stage, pre-market companies and SMEs.
The position paper submitted is based on a round-table discussion with representatives from business, finance and Parliament, which was chaired by Nicky Morgan MP. The submission is a summary of the discussion and the suggested recommendations, but does not necessarily present the views of individual participants or the chair.
To find out more about the Westminster Sustainable Business Forum and its ongoing programme of work, contact Rachel White at rachel.white@policyconnect.org.uk/ 020 7202 8584 or go to http://www.policyconnect.org.uk/wsbf
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