UK leaders will struggle to keep the 'green' in GIB

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Richard Heap
March 25, 2016
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UK leaders will struggle to keep the 'green' in GIB

Will the Green Investment Bank stay green? It's the £4bn question.

This month, the UK government officially started the sale processfor the bank, which it formed in 2012 to support projects that private investors would not touch, in sectors such as offshore wind. Since then, it has invested £2.6bn in 68 schemes and leveraged total investment of £10.6bn. This is attracting buyers for a buyout at around the £4bn mark.

For example, this week we have seen the likes of Aviva, Macquarie and M&G Investments linked with bids, whether by themselves or with other investors. Other potential bidders are likely to include banks, institutional investors and sovereign wealth funds.

The government is looking to conclude a deal this year, but we are sceptical about whether the bank can continue its ‘green mission’ in private ownership. It will be very tough.

For example, last month the government removed GIB’s legal duty to invest only in eco-friendly projects. It said it had to do this for the sale process, but it does mean the GIB can now technically invest in sectors like fracking, with UK leaders powerless to intervene.

That is how it should be if the bank is in private hands. Companies are answerable to shareholders before society, and the UK GIB should be free to invest as it pleases as long as it is acting legally. The government can carry on talking about keeping the bank’s green mission, but it can only guarantee this when it owns the GIB. Selling means losing that control.

Not that we think the government is bothered. Yes, the UK has targets on carbon reduction and renewables, but David Cameron’s government has been consistently cutting support for renewables since last May. But we should be bothered, as the risk is that GIB
will end up as A.N.Other Bank that does not back new sectors.

The bank has done a great job in attracting commercial investors into untested industries, and selling it could lose that momentum. We do not see the sense of trading that spirit of innovation and, potentially, a position at the forefront of sectors including offshore wind in return for a one-off payment of £4bn to the Treasury.

The government has been taking steps that it says will help to ensure GIB keeps focused on its green mission. This month, it set up ‘special shareholder’ company Green Purposes Company Ltd. to sit on the bank’s board, with special voting rights to block deals that are not ‘green’ enough. It will also be able to block any moves to alter GIB’s core principles.

The challenge to keeping the GIB ‘green’ is making sure the people at GPC Ltd. have the gravitas to stand up to their majority shareholder, whoever that ends up being. The Royal Society, Institute of Chartered Accountants and Law Society of Scotland have been tasked with finding three such individuals, and these appointments will be key. They will need serious clout.

But, even with GPC Ltd., we do not see how the government can guarantee that the GIB will stay ‘green’. Placing the onus for its green goals on three people and a set of investment principles is not the same as having those goals enshrined in UK law.

We expect the GIB to become even more commercially-focused.
It must, and it is naive of the government to think otherwise. It will keep investing in offshore wind as that sector is less risky than in 2012, but there is no guarantee it will back new technologies. If the government wants the GIB to do the job it is now, it should not sell.

UK leaders will push for a sale, though. And, in five years, when the government wants a commercially-focused lender to back new technologies that others will not touch then it will set up something that looks like the GIB. These things tend to repeat themselves.

Will the Green Investment Bank stay green? It's the £4bn question.

This month, the UK government officially started the sale processfor the bank, which it formed in 2012 to support projects that private investors would not touch, in sectors such as offshore wind. Since then, it has invested £2.6bn in 68 schemes and leveraged total investment of £10.6bn. This is attracting buyers for a buyout at around the £4bn mark.

For example, this week we have seen the likes of Aviva, Macquarie and M&G Investments linked with bids, whether by themselves or with other investors. Other potential bidders are likely to include banks, institutional investors and sovereign wealth funds.

The government is looking to conclude a deal this year, but we are sceptical about whether the bank can continue its ‘green mission’ in private ownership. It will be very tough.

For example, last month the government removed GIB’s legal duty to invest only in eco-friendly projects. It said it had to do this for the sale process, but it does mean the GIB can now technically invest in sectors like fracking, with UK leaders powerless to intervene.

That is how it should be if the bank is in private hands. Companies are answerable to shareholders before society, and the UK GIB should be free to invest as it pleases as long as it is acting legally. The government can carry on talking about keeping the bank’s green mission, but it can only guarantee this when it owns the GIB. Selling means losing that control.

Not that we think the government is bothered. Yes, the UK has targets on carbon reduction and renewables, but David Cameron’s government has been consistently cutting support for renewables since last May. But we should be bothered, as the risk is that GIB
will end up as A.N.Other Bank that does not back new sectors.

The bank has done a great job in attracting commercial investors into untested industries, and selling it could lose that momentum. We do not see the sense of trading that spirit of innovation and, potentially, a position at the forefront of sectors including offshore wind in return for a one-off payment of £4bn to the Treasury.

The government has been taking steps that it says will help to ensure GIB keeps focused on its green mission. This month, it set up ‘special shareholder’ company Green Purposes Company Ltd. to sit on the bank’s board, with special voting rights to block deals that are not ‘green’ enough. It will also be able to block any moves to alter GIB’s core principles.

The challenge to keeping the GIB ‘green’ is making sure the people at GPC Ltd. have the gravitas to stand up to their majority shareholder, whoever that ends up being. The Royal Society, Institute of Chartered Accountants and Law Society of Scotland have been tasked with finding three such individuals, and these appointments will be key. They will need serious clout.

But, even with GPC Ltd., we do not see how the government can guarantee that the GIB will stay ‘green’. Placing the onus for its green goals on three people and a set of investment principles is not the same as having those goals enshrined in UK law.

We expect the GIB to become even more commercially-focused.
It must, and it is naive of the government to think otherwise. It will keep investing in offshore wind as that sector is less risky than in 2012, but there is no guarantee it will back new technologies. If the government wants the GIB to do the job it is now, it should not sell.

UK leaders will push for a sale, though. And, in five years, when the government wants a commercially-focused lender to back new technologies that others will not touch then it will set up something that looks like the GIB. These things tend to repeat themselves.

Will the Green Investment Bank stay green? It's the £4bn question.

This month, the UK government officially started the sale processfor the bank, which it formed in 2012 to support projects that private investors would not touch, in sectors such as offshore wind. Since then, it has invested £2.6bn in 68 schemes and leveraged total investment of £10.6bn. This is attracting buyers for a buyout at around the £4bn mark.

For example, this week we have seen the likes of Aviva, Macquarie and M&G Investments linked with bids, whether by themselves or with other investors. Other potential bidders are likely to include banks, institutional investors and sovereign wealth funds.

The government is looking to conclude a deal this year, but we are sceptical about whether the bank can continue its ‘green mission’ in private ownership. It will be very tough.

For example, last month the government removed GIB’s legal duty to invest only in eco-friendly projects. It said it had to do this for the sale process, but it does mean the GIB can now technically invest in sectors like fracking, with UK leaders powerless to intervene.

That is how it should be if the bank is in private hands. Companies are answerable to shareholders before society, and the UK GIB should be free to invest as it pleases as long as it is acting legally. The government can carry on talking about keeping the bank’s green mission, but it can only guarantee this when it owns the GIB. Selling means losing that control.

Not that we think the government is bothered. Yes, the UK has targets on carbon reduction and renewables, but David Cameron’s government has been consistently cutting support for renewables since last May. But we should be bothered, as the risk is that GIB
will end up as A.N.Other Bank that does not back new sectors.

The bank has done a great job in attracting commercial investors into untested industries, and selling it could lose that momentum. We do not see the sense of trading that spirit of innovation and, potentially, a position at the forefront of sectors including offshore wind in return for a one-off payment of £4bn to the Treasury.

The government has been taking steps that it says will help to ensure GIB keeps focused on its green mission. This month, it set up ‘special shareholder’ company Green Purposes Company Ltd. to sit on the bank’s board, with special voting rights to block deals that are not ‘green’ enough. It will also be able to block any moves to alter GIB’s core principles.

The challenge to keeping the GIB ‘green’ is making sure the people at GPC Ltd. have the gravitas to stand up to their majority shareholder, whoever that ends up being. The Royal Society, Institute of Chartered Accountants and Law Society of Scotland have been tasked with finding three such individuals, and these appointments will be key. They will need serious clout.

But, even with GPC Ltd., we do not see how the government can guarantee that the GIB will stay ‘green’. Placing the onus for its green goals on three people and a set of investment principles is not the same as having those goals enshrined in UK law.

We expect the GIB to become even more commercially-focused.
It must, and it is naive of the government to think otherwise. It will keep investing in offshore wind as that sector is less risky than in 2012, but there is no guarantee it will back new technologies. If the government wants the GIB to do the job it is now, it should not sell.

UK leaders will push for a sale, though. And, in five years, when the government wants a commercially-focused lender to back new technologies that others will not touch then it will set up something that looks like the GIB. These things tend to repeat themselves.

Will the Green Investment Bank stay green? It's the £4bn question.

This month, the UK government officially started the sale processfor the bank, which it formed in 2012 to support projects that private investors would not touch, in sectors such as offshore wind. Since then, it has invested £2.6bn in 68 schemes and leveraged total investment of £10.6bn. This is attracting buyers for a buyout at around the £4bn mark.

For example, this week we have seen the likes of Aviva, Macquarie and M&G Investments linked with bids, whether by themselves or with other investors. Other potential bidders are likely to include banks, institutional investors and sovereign wealth funds.

The government is looking to conclude a deal this year, but we are sceptical about whether the bank can continue its ‘green mission’ in private ownership. It will be very tough.

For example, last month the government removed GIB’s legal duty to invest only in eco-friendly projects. It said it had to do this for the sale process, but it does mean the GIB can now technically invest in sectors like fracking, with UK leaders powerless to intervene.

That is how it should be if the bank is in private hands. Companies are answerable to shareholders before society, and the UK GIB should be free to invest as it pleases as long as it is acting legally. The government can carry on talking about keeping the bank’s green mission, but it can only guarantee this when it owns the GIB. Selling means losing that control.

Not that we think the government is bothered. Yes, the UK has targets on carbon reduction and renewables, but David Cameron’s government has been consistently cutting support for renewables since last May. But we should be bothered, as the risk is that GIB
will end up as A.N.Other Bank that does not back new sectors.

The bank has done a great job in attracting commercial investors into untested industries, and selling it could lose that momentum. We do not see the sense of trading that spirit of innovation and, potentially, a position at the forefront of sectors including offshore wind in return for a one-off payment of £4bn to the Treasury.

The government has been taking steps that it says will help to ensure GIB keeps focused on its green mission. This month, it set up ‘special shareholder’ company Green Purposes Company Ltd. to sit on the bank’s board, with special voting rights to block deals that are not ‘green’ enough. It will also be able to block any moves to alter GIB’s core principles.

The challenge to keeping the GIB ‘green’ is making sure the people at GPC Ltd. have the gravitas to stand up to their majority shareholder, whoever that ends up being. The Royal Society, Institute of Chartered Accountants and Law Society of Scotland have been tasked with finding three such individuals, and these appointments will be key. They will need serious clout.

But, even with GPC Ltd., we do not see how the government can guarantee that the GIB will stay ‘green’. Placing the onus for its green goals on three people and a set of investment principles is not the same as having those goals enshrined in UK law.

We expect the GIB to become even more commercially-focused.
It must, and it is naive of the government to think otherwise. It will keep investing in offshore wind as that sector is less risky than in 2012, but there is no guarantee it will back new technologies. If the government wants the GIB to do the job it is now, it should not sell.

UK leaders will push for a sale, though. And, in five years, when the government wants a commercially-focused lender to back new technologies that others will not touch then it will set up something that looks like the GIB. These things tend to repeat themselves.

Will the Green Investment Bank stay green? It's the £4bn question.

This month, the UK government officially started the sale processfor the bank, which it formed in 2012 to support projects that private investors would not touch, in sectors such as offshore wind. Since then, it has invested £2.6bn in 68 schemes and leveraged total investment of £10.6bn. This is attracting buyers for a buyout at around the £4bn mark.

For example, this week we have seen the likes of Aviva, Macquarie and M&G Investments linked with bids, whether by themselves or with other investors. Other potential bidders are likely to include banks, institutional investors and sovereign wealth funds.

The government is looking to conclude a deal this year, but we are sceptical about whether the bank can continue its ‘green mission’ in private ownership. It will be very tough.

For example, last month the government removed GIB’s legal duty to invest only in eco-friendly projects. It said it had to do this for the sale process, but it does mean the GIB can now technically invest in sectors like fracking, with UK leaders powerless to intervene.

That is how it should be if the bank is in private hands. Companies are answerable to shareholders before society, and the UK GIB should be free to invest as it pleases as long as it is acting legally. The government can carry on talking about keeping the bank’s green mission, but it can only guarantee this when it owns the GIB. Selling means losing that control.

Not that we think the government is bothered. Yes, the UK has targets on carbon reduction and renewables, but David Cameron’s government has been consistently cutting support for renewables since last May. But we should be bothered, as the risk is that GIB
will end up as A.N.Other Bank that does not back new sectors.

The bank has done a great job in attracting commercial investors into untested industries, and selling it could lose that momentum. We do not see the sense of trading that spirit of innovation and, potentially, a position at the forefront of sectors including offshore wind in return for a one-off payment of £4bn to the Treasury.

The government has been taking steps that it says will help to ensure GIB keeps focused on its green mission. This month, it set up ‘special shareholder’ company Green Purposes Company Ltd. to sit on the bank’s board, with special voting rights to block deals that are not ‘green’ enough. It will also be able to block any moves to alter GIB’s core principles.

The challenge to keeping the GIB ‘green’ is making sure the people at GPC Ltd. have the gravitas to stand up to their majority shareholder, whoever that ends up being. The Royal Society, Institute of Chartered Accountants and Law Society of Scotland have been tasked with finding three such individuals, and these appointments will be key. They will need serious clout.

But, even with GPC Ltd., we do not see how the government can guarantee that the GIB will stay ‘green’. Placing the onus for its green goals on three people and a set of investment principles is not the same as having those goals enshrined in UK law.

We expect the GIB to become even more commercially-focused.
It must, and it is naive of the government to think otherwise. It will keep investing in offshore wind as that sector is less risky than in 2012, but there is no guarantee it will back new technologies. If the government wants the GIB to do the job it is now, it should not sell.

UK leaders will push for a sale, though. And, in five years, when the government wants a commercially-focused lender to back new technologies that others will not touch then it will set up something that looks like the GIB. These things tend to repeat themselves.

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Not a member yet?

Become a member of the 6,500-strong A Word About Wind community today, and gain access to our premium content, exclusive lead generation and investment opportunities.