The business secretary has announced that the Green Investment Bank (GIB) will have the ability to borrow money, a move that paves the way towards accessing more capital.
In the financial year 2015/16, the GIB will be able to borrow up to £500m from a Government lending fund called the National Loans Fund. Vince Cable (left) said that this was the first step to shift the bank towards debt capital market funding.
“The key psychological policy step has now be made,” Cable said at the GIB’s first annual review conference (27 June).
Cable also announced that the Treasury will support the GIB with £800m in 2015/16, allowing the bank to plan its activity ahead into the next parliament.
The GIB’s chief executive Shaun Kingsbury welcomed the announcement of continued Government support, but especially the granting of the ability to borrow.
“The key for us is being able to borrow… it means we are a fully fledged bank,” he said.
Andrew Page, a partner at investors Foresight Group, told MRW that the ability to borrow represented the first step for the bank to become a self-sustaining institution, as originally planned:
“The GIB was set up with the plan of being an enduring institution, not one that simply deployed tax-payer money into the market. This is a very positive move demonstrating that the bank is starting to deliver against this plan.”
Paul Levett, chairman at specialist environmental consultancy LRS, told MRW that the move will increase the GIB’s capacity to meet the large demand for funding in the waste management and recycling industry.
“There is a clear demand for early stage funding during the development, construction and commission phases because [waste and recycling] projects at those stages do not appeal to traditional banks, so we are happy to hear of this additional capacity that the bank will have,” he said.
Even starting with £500m of Government support is significant, he added, because the GIB’s support for projects will give confidence to other funders. “I will expect that £500m could easily translate in £2bn of investment in the sector,” he said.
The GIB was launched in November 2012 with £3.8bn of Government funding to support investments in renewables, energy efficiency, and waste and recycling projects. It reported pre-tax losses of more than £6m for its first six month of operations, which Kingsbury said was understandable for such a new organisation.