Green investment bank may be announced in the budget, but what would it deliver?

Published in The Guardian, on 23rd March 2010.

A green investment bank or fund is expected to be unveiled in Alastair Darling’s budget tomorrow. But there is little clarity on how it would operate, or what it would invest in. The idea has been studied by a range of financial and environmental experts, so the Guardian asked a panel of experts two questions:

1. How should it most effectively be set up?
2. What should it use its financial resources to support?

Tom’s response:
1. The trick to establishing a successful green investment bank is get its distance from the Treasury right. Being either too close or to distant will see its initiative crushed. It must be established by statute to secure its independence with a structure modelled on that of the European Investment Bank. Its public purpose must be defined with great clarity to ward off subsidy seekers. The majority public shareholding should be equally split between DECC, to reflect its responsibility for carbon budgets, and the Treasury. The devolved Administrations should have a minority shareholding.

2. A green investment bank should focus exclusively on funding infrastructure. The foundations of a low carbon energy system are smart grids, high speed rail links and electric vehicle charging networks – the platforms for a wide range of technologies. They are to 21st Century competitiveness what the motorways were to the 20th Century. The private sector will not build this infrastructure on time and to scale without public participation. The green bank’s task is to lower the cost of capital for this infrastructure not to be an extra pocket to feed nuclear or renewable technology subsidy seekers.

Other contributors:

Sean Kidney, chair of the Climate Bonds initiative
Doug Parr, policy director at Greenpeace UK
Tom Murley, chairman of the British Venture Capital Association’s Energy, Environment and Technology Board
Andrew Simms, policy director at the new economics foundation
Chris Goodall, author
James Cameron, vice chairman, Climate Change Capital

About tomburke

Tom Burke is the Chairman of E3G, Third Generation Environmentalism, and an Environmental Policy Adviser (part time) to Rio Tinto plc. He is a Visiting Professor at both Imperial and University Colleges, London. He is a member of the External Review Committee of Shell and the Sustainable Sourcing Advisory Board of Unilever and a Trustee of the Black-E Community Arts Project, Liverpool.
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