Government seeks to assuage fears over Green bank privatisation

Environmental campaigners have expressed concern that the privatisation of the government's Green Investment Bank will reduce funding for projects essential to address climate change risks.

Business Secretary Sajid Javid kicked off the privatisation of the taxpayer-backed lender, the first of its kind in the world, yesterday in a move The Guardian says is hoped will bring in as much as £4bn for the Treasury, perhaps by the end of this year.

Privatising the bank was the best way to leverage its impact by enabling it to borrow money from international investors, said Javid.

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This echoes previous calls for a sale from the chief executive of the bank itself, Shaun Kingsbury, who has said its activities are constrained by the fact it can only deploy the funds from the £3.8bn of cumulative government cash it has received, which is not sufficient to meet its long-term aims.

Under European state aid rules, the government cannot pump funding into a nominally private company as it would be deemed to be giving it an advantage over competitors. Similarly, if it sells out it cannot still retain legislative control over the bank as this would mean it remains designed as a public sector organisation, says the BBC.

So, the government wants to sell the business – and Kingsbury says he's received expressions of interest from private equity investors, sovereign wealth funds and large foreign investment banks.

To assuage fears over the move out of government control – and a legal obligation to remain true to its environmental remit – Javid confirmed that ministers will approve the creation of a "golden share" to be held by an independent company that will allow it to veto any change in its articles of association.

However, the campaigners are not convinced. Alongside the lack of legal backing, they assert that a move to the private sector and outside ministerial control could lead to the bank eschewing the sort of high-risk, complex projects that might not otherwise get funding.

There are also concerns about the bank's international ambitions. Some believe it might end up diverting a greater proportion of its activities overseas and not in the UK, where the government has been routinely criticised for not having a consistent policy in relation to renewable energy.

So far, the Green Investment Bank has made 63 investments, committing £2.2bn into projects with a total value of £10bn.

Green Investment Bank boss gets privatisation wish

25 June 2015

Privatisation is back in the headlines again today as the government confirmed reports at the weekend that it is to sell some of its stake in the Green Investment Bank.

An article in Sky News at the weekend had said advisers from Bank of America Merrill Lynch were working with the Government on plans to sell down its 100 per cent holding which were to be announced in George Osborne's upcoming summer budget on 8 July. Instead Business Secretary Sajid Javid confirmed the plans this morning in a speech to the bank's annual review meeting.

No firm details of the scale of the stake that will be sold have been given, but both the Financial Times and The Guardian say they have been briefed that around 70 per cent could be up for grabs. Given the current loan book stands at around £2bn and that the government expects to turn a modest profit on its investment, this would imply sale proceeds in excess of £1.4bn.

The move has been decried by figures on the left, with the Green Party's sole MP Caroline Lucas branding the sell-off plan "rash and irresponsible". Those against the move see it as a simple extension of the Conservative government's privatisation agenda, which has also seen it announce the sale of the remaining 30 per cent it controls in Royal Mail.

But Green Investment Bank chief executive Shaun Kingsbury has been calling for the move for at least a year, saying that the Government's £3.8bn investment would be insufficient to sustain its long-term investment objectives and citing Treasury restrictions and EU state aid rules that stop it raising additional funding.

The annual report published this morning revealed the bank had made investments of £723m in the past year and made a profit for the first time of £3.2m for the six months to April.