The Green Investment Bank (GIB) – proposed as part of government’s strategy to tackle climate change through the promotion of investment in environment and clean energy projects, is not the most controversial topic to spring to mind. Yet the subject of how to proceed with plans for the GIB has however been one of hot debate.
The GIB hopes to raise £200 billion in the long term to help renew the UK’s energy grid. At present, the government has pledged £1 billion towards the bank, which critics argue is simply not enough. The pinnacle of the controversy however arises over how to proceed with the GIB; as an investment bank or fund.
If the GIB were classified as a bank by the National Statistics Office, (whether independent or publicly owned), it would have the ability to raise additional capital and borrow money. If however the GIB were to take on the form of a fund it would not be granted these borrowing rights, and would therefore be expected to fall far short of government climate change targets due to a lack of funds.
It is subsequently argued that the GIB should adopt the form of a public sector investment bank, as a government backed bank would have a higher rating than an independent one. The major obstacle to this lies in the reluctance of the treasury to back the GIB as this would mean that government would have to accept all future liability, which in turn could threaten to undermine plans to reduce the deficit. If the GIB were to alternatively become a fund, the UK could miss out on the opportunity to attract billions of pounds worth of green investment to assist economic growth.
If climate change targets are to be reached with additional potential for economic growth there is a strong case to designate the GIB a public bank. Nonetheless, considering the current economic climate, uncertainty, and resulting caution this is a subject that will continue to be debated. Plans concerning the future role of the GIB are due to be released at the end of May.