The decision by the new Coalition Government in the UK to promote green investments has been welcomed by many in the Greentech and CleanTech sectors.
With the Liberal Democrats and Conservatives having formed a government together, one of the pledges in a new coalition agreement is to set up a new Green Investment Bank . This would presumably be modelled on the Structural Investment bank model that we see in other countries.
This allows projects to proceed at a lower risk for the normal large investors such as Banks, Investment Funds etc. The Green Investment Bank would take a share in the project and it’s lending terms would include greater scrutiny of the financial viability thus bringing more credibility to any proposed scheme.
For example a new large offshore wind scheme would cost in the region £1billion - £2 billion and typically any one investor would look at investing £100 million, so a club of between 10 and 20 banks/other lenders would be needed to finance it. Often one or two lenders will take the lead and arrange the deal. Bringing in a fund such as a UK government backed Green Investment Bank for say 20 - 30% of the project would really reduce the risk to other lenders and make a project much more bankable.
More importantly from the Government (or taxpayers) perspective; the Green Investment Bank would make an investment of say £200 million (for a £1 billion project) and the private sector would put in the other £800 million. So the Government backed money levers in 4 times more money than the taxpayer has invested.
The money would not be lost to the taxpayer either as these projects deliver an income stream to their investors and so the Green Investment Bank would get its money bank over a period of around 12-14 years. For clarity this is not the “payback” period but the “repayment” period.
As a further twist, the new UK Government is talking about widening the scope of the ISA (Individual Savings Account – a tax except savings vehicle something like 401K) to include a “Green ISA” option.
There are currently two forms of ISA in the UK – Shares or Cash. It is conceivable that a new Shares Green ISA would contribute the money needed to fund the new Green Investment Bank. Thus allowing ordinary citizens to benefit from the potential profits whilst reducing the need to raise tax to fund the Green Investment Bank.
All in all, what we see before us is a golden opportunity to kick-start green investment in the UK. Let’s hope that the measures are included in the new Coalition Government’s first “Queen's Speech” (Legislative Program).
With the Liberal Democrats and Conservatives having formed a government together, one of the pledges in a new coalition agreement is to set up a new Green Investment Bank . This would presumably be modelled on the Structural Investment bank model that we see in other countries.
This allows projects to proceed at a lower risk for the normal large investors such as Banks, Investment Funds etc. The Green Investment Bank would take a share in the project and it’s lending terms would include greater scrutiny of the financial viability thus bringing more credibility to any proposed scheme.
For example a new large offshore wind scheme would cost in the region £1billion - £2 billion and typically any one investor would look at investing £100 million, so a club of between 10 and 20 banks/other lenders would be needed to finance it. Often one or two lenders will take the lead and arrange the deal. Bringing in a fund such as a UK government backed Green Investment Bank for say 20 - 30% of the project would really reduce the risk to other lenders and make a project much more bankable.
More importantly from the Government (or taxpayers) perspective; the Green Investment Bank would make an investment of say £200 million (for a £1 billion project) and the private sector would put in the other £800 million. So the Government backed money levers in 4 times more money than the taxpayer has invested.
The money would not be lost to the taxpayer either as these projects deliver an income stream to their investors and so the Green Investment Bank would get its money bank over a period of around 12-14 years. For clarity this is not the “payback” period but the “repayment” period.
As a further twist, the new UK Government is talking about widening the scope of the ISA (Individual Savings Account – a tax except savings vehicle something like 401K) to include a “Green ISA” option.
There are currently two forms of ISA in the UK – Shares or Cash. It is conceivable that a new Shares Green ISA would contribute the money needed to fund the new Green Investment Bank. Thus allowing ordinary citizens to benefit from the potential profits whilst reducing the need to raise tax to fund the Green Investment Bank.
All in all, what we see before us is a golden opportunity to kick-start green investment in the UK. Let’s hope that the measures are included in the new Coalition Government’s first “Queen's Speech” (Legislative Program).
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