The Business Secretary announces plans to support the world-leading Green Investment Bank by moving it into the private sector.
In the spirit of the GIB I was going to come along today with a speech that is 100% recycled.
Unfortunately my officials thought that my notes from last week’s Citizens Advice Parliamentary forum wouldn’t be that interesting for you!
This magnificent building, the masterpiece of Victorian architect John Gibson, celebrates its 150th aaniversary this year.
It was once the home of the National Provincial Bank, an institution whose roots run back to 1833.
A time when slavery was legal, Charles Dickens was an anonymous first-time author, and Earl Grey was better known as the Prime Minister than as a blend of tea.
And set against a timeline like that, when you look at the Green Investment Bank – established in 2012 – it looks like a tiny blip in Britain’s financial history.
Yet what GIB lacks in age has been more than made up for in impact.
The renewable energy projects in the GIB portfolio generate enough electricity to power the city of Birmingham twice over.
In 2014, GIB-backed initiatives led to CO2 emission reductions equivalent to 1.6 million cars being taken off the road for 12 months.
And every year GIB investments will see 720,000 more tonnes of rubbish being recycled, with almost 2.1 million fewer tonnes being sent to landfill. Not bad for three years, but of course this is only half the story.
Because GIB’s ‘double bottom line’ guarantees that all investments deliver for the environment AND for the British taxpayer.
GIB exists to make serious investments in serious business projects.
Projects that create skilled jobs for more British workers.
Projects that deliver reliable electricity for British homes and businesses.
And projects that help local authorities spend less on energy so they can spend more on their frontline services.
The bank’s business model has proved so successful that it is already in profit less than three years after opening its doors.
The public money the bank has invested has been supplemented by almost three times as much private capital.
And the rate of return on its portfolio is already at 9%.
It’s an incredible record of success in an incredibly short time.
The bank, I think it’s right to say, has exceeded all expectations.
And let me now take this opportunity to thank Lord Smith, Shaun and their teams in Edinburgh and London for everything they have done to make this happen.
The challenge now is to build on this success.
To give GIB the room and resources it needs in order to keep growing.
It is no secret that we have always planned to bring private capital into the GIB when the time is right.
With the great progress that the bank has made, and its healthy portfolio of profitable investments, it’s clear that time is now.
So, along with my counterparts in the Department for Energy and Climate Change and the Department for the Environment, Food and Rural Affairs, we have decided to begin moving the Green Investment Bank into private ownership.
The detail and timing will depend on the outcome of discussions, but our plan is now very clear: to sell at least a majority of the Government’s shares to private investors during the lifetime of this Parliament.
Now I’m sure some people will say this shows the Government is reneging on its environmental commitments.
That we’re somehow throwing our green credentials into a coal-fired furnace.
But such cynics could not be more wrong.
The bank will still be green, it will still be profitable, it will still be a market-leader in financing environmentally sound infrastructure.
But it will be free from limitations on where it can borrow money, and free from EU regulations on state aid.
The bank will be able to access a much greater volume of capital and deploy it across a much wider array of green projects. And that means more money going into green innovations.
More support for environmental entrepreneurs
More resources dedicated to renewable energy and waste management.
That’s why the GIB’s board and management fully support the move to private capital – it’s good news for the bank and it’s good news for the environment.
But the benefits of privatisation will go much further than this.
Today’s announcement has the potential to help turn green investment into a truly global sector, and bring the vast resources of private finance to help create a more sustainable economy.
As the Prime Minister recently said, “it’s time the market got to work on climate change”.
If we’re going to make a rea difference, make worldwide progress in cutting carbon emissions, then we need more than government action.
Now politicians can make grand statements and set bold goals, but we need the private sector to get on board and deliver business-led solutions to help deal with the challenges we face.
There are no shortage of innovative entrepreneurs out there who would love to do just that.
But too often they’ve found it hard to secure the private finance they need in on order to make that difference.
In banking circles – and I know this from my own time in that sector – the phrase ‘green investment’ has long been seen as something of an oxymoron.
It brought to mind unviable technology requiring grant funding to survive, or a kind of ‘knit-your-own-yoghurt’ enterprise incapable of delivering a profit.
A nice way, perhaps, of ticking your corporate/social responsibility box, but not a serious investment prospect.
GIB has begun to change all of that.
Its rigorous, commercial approach to investment has helped attract sovereign wealth funds, pension schemes and private equity investors to the sector for the very first time.
And that has proved to the world that green investments don’t have to be the sole preserve of public money.
That environmentally friendly technology can not merely survive in the markets, but is capable of providing a lasting and a lucrative return on serious investments.
And finally, GIB provides us with a model of that rarest of things – a government successfully involving itself in the markets.
Unlike so many similar attempts at creating state-run businesses, the bank has succeeded because it was never about picking winners, betting on white elephants or using taxpayers’ money to prop up failing companies.
We simply identified a need that wasn’t being served by the market and showed the world how that gap could be filled.
Now, after less than three years the investment has been paid back, with interest, and we’ve helped create a market that can stand up on its own two feet.
GIB has grown up. It’s time to let it go.
It’s important that we do so, for all the reasons that I’ve explained today.
But also because I don’t want to see GIB become just another government initiative.
A short-term project subject to the whims of politicians, reliant on funding that could vanish overnight with a change of policy or a change of government. And I do hope we don’t have a change in government! No. I want GIB to become a permanent, lasting fixture in the world of British banking, and that will only happen with the support of the private sector.
I can’t say whether, like the company this hall was built for, GIB will still be doing business almost two centuries from now.
But I do know that by setting GIB free from the shackles of state ownership we are giving it the opportunity to fulfil its potential.
To create a global market and help lead it, putting this country at the forefront of green investment.
And that’s good news for GIB, good news for the environment, and good news for Britain.