Vince Cable published a progress report on the GIB setting out more detail on its governance and business model.
The GIB’s mission will be to accelerate private sector investment in the UK’s transition to a green economy. It will play a vital role in addressing market failures which are holding back private sector investment.
The government committed in the 2011 budget to fund the GIB with £3bn over the period to 2015.
The GIB will evolve over three phases:
- Incubation from 2012 to state aid approval. Government will make direct investments.
- Establishment as a stand-alone institution following approval
- Full borrowing powers from 2015, subject to public sector net debt falling as a percentage of GDP.
Sectors likely to be eligible for intervention initially include offshore wind, non-domestic energy efficiency and waste. Work is ongoing to explore other sectors which will change over time.
Its initial remit will be to focus on green infrastructure assets and on the twin objectives of achieving significant green impact and making financial returns.
As the bank will need to be approved by the European Commission before it can be established, there will be a phased approach. Once it has been agreed, the GIB will be enshrined in legislation confirming its independent status as an enduring institution with a key public role.
In order to make rapid progress, the government will make direct, state-aid compliant investments in green infrastructure projects from April 2012 until these investments can be transferred to the GIB.
The business secretary is also setting up an advisory group, chaired by Sir Adrian Montague, to provide strategic direction for the GIB in its early years.
Mr Cable said: “This is an opportunity for the UK to lead the way in the transition to a low carbon economy with the world’s first dedicated Green Investment Bank.
“The GIB will become a key component of this transition which needs significant investment over the coming decades.”
Sir Adrian Montague, chair of the advisory group said: “The Green Investment Bank is a genuinely radical innovation. The keys to the GIB's success are going to be precise targeting and brilliant execution.
“It is both a privilege, and an irresistible opportunity, to have been asked by the secretary of state to chair the new institution's advisory board. My first task is to advise on the membership of the advisory board. The GIB needs the best people in order to get off to a flying start.”
Industry reaction
Richard Diment, director general of the Federation of Master Builders, said: "The FMB is one of a number of organisations including businesses, trade associations and NGOs that wrote to the chancellor prior to the Budget asking for the Green Investment Bank to be used to help make the Green Deal a success. The deputy prime minister and business secretary have now confirmed the Government is looking at the potential for using the bank in this way which is a step in the right direction but it is essential that they recognize how important the Green Investment Bank is going to be if we are to have any chance of meeting future domestic energy needs.
“If the Green Deal is to complete 14 million upgrades by 2020 the work will need to be completed at the rate of about 1.75m homes per annum; this is around 33,000 per week or nearly 4,800 per day. To do this the government will need to do more to stimulate client demand, and will need to drastically increase the number of Green Deal finance providers. The Green Bank can do both.
"The Green Investment Bank has the potential to lower the cost of finance and to create a greater choice of Green Deal providers. This would create greater savings for consumers, incentivize uptake, and make more energy efficiency measures cost-effective. The involvement of small and medium sized contractors will also be essential to the successful delivery of an ambitious programme of energy efficiency retrofits. Therefore, the Green Investment Bank should be used to make low cost Green Deal finance more widely available."
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