The UK's Green Investment Bank - not yet a done deal

The private sector, which has been wary of a government-backed green investment bank, supported the idea and the British Private Equity and Venture Capital Association’s (BVCA) Energy, Environment and Technology Board (EETB) even issued a report outlining the considerations that the creation of a GIB would require.

“If properly established, the GIB could fill the funding gap - in particular with relation to smaller green infrastructure projects which have suffered at the expense of larger (green) infrastructure projects,” observed Simon Walker, partner and head of venture capital at law firm Taylor Wessing.

On the face of it, the plan for a GIB has cross-party support  (it was the Conservatives who first mooted the possibility of such an entity back in November 2009) and it will remain on the agenda irrespective of the outcome of this year’s general election.  Or will it? Cross-party support is one thing, but taking a project like this from concept to reality is an entirely different matter, and one which will face a whole range of obstacles, from funding to policy implementation.

Conceptually, the GIB is to be funded from a £1bn Green Infrastructure Fund –also announced by the government – which would be matched with another £1bn of private sector capital.

According to Walker: “The GIB would initially be funded through the sale of some of its infrastructure assets such as the Channel Tunnel, but in the current market, assets are unlikely to fetch ‘top dollar’. Therein lies the dilemma: the government can decide to sell at a loss to fund the GIB or it can wait until it can get better prices, but then risks failing to meet 2020 targets.” 

And the obstacles go beyond the funding. Even if the GIB were to get off the ground there are fundamental doubts about whether the UK is a good place to invest in green infrastructure. “Right now some investors are holding back as they believe that in comparison to other European markets, UK regulation needs to be more coherent. There is a perceived lack of certainty and coordination between the various government and non-governmental players both at the policy making and implementation,” says Dominic FitzPatrick, partner and head of projects at Taylor Wessing.

Of course, it remains entirely possible that further cuts will be made in the post-election budget, effectively leaving the initiative dead in the water. In the meantime, the clock is ticking; 2020 is only a decade away.

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