CSR and the UK Green Investment Bank: An Opportunity Lost?

In the run up to the UK budget next week, a row has broken out over Government’s plans for a Green Investment Bank.

When it was first announced, the Green Investment Bank was lauded as a CSR triumph – with the Chancellor of the Exchequer pledging £1bn as well as money from the sale of Government assets – pushing the total to around £2bn. It was supposed to be structured as a normal investment bank – able to raise money, and issue bonds and other products. However, plans are now being watered down – resulting in a scathing attack from a group of Members of Parliament (MPs).

MPs from the Environmental Audit Committee (EAC) say that there have now been disagreements within Government over whether it should be a proper bank – able to borrow money and raise capital – or whether it should operate just as a green ‘fund’. MPs oppose the change. They also want the bank to be able to issue ‘green ISAs’ as investments for individuals to put money into low-carbon projects.

From a CSR perspective, this would not be good news for UK plc because it would reduce the amount of investment in green business. The concern is that energy companies, NGOs and financial organisations, have indicated that between £200bn and £1 trillion of private sector investment is needed over the next 10-20 years if the UK is to meet its renewable energy targets.

The EAC held an inquiry at which accountants Ernst and Young, which have concentrated CSR efforts on building a low carbon economy, issued some stark warnings. They said that traditional sources of private sector funding would only deliver £50-£80 billion of investment. This would leave the UK with a huge shortfall.

The only way around this would be for the Green investment Bank to raise extra capital – and it can only do this as a ‘proper bank’. Disagreements have apparently arisen because if the bank is classified as ‘public sector’ its borrowing could appear on the Government’s balance sheet – undermining Government plans to reduce the deficit.

However, the bank is such a key element to green growth and meeting the renewable energy targets that the EAC is urging the Government to think again. It believes that the bank needs to concentrate on boosting what it calls ‘fledgling environmental investment’ where markets don’t yet exist. There is CSR appetite but it is, as yet, untested.

EAC Chairman Joan Walley MP said:
“New nuclear power stations that would be built anyway should not be bankrolled by the Green Investment Bank. It should be used to support fledgling green technologies that are struggling to get off the ground.

Many new clean energy projects are viable, but can’t find funding because their novelty deems them risky in the eyes of banks and investors.

A fully fledged Green Investment Bank would be able to kick-start green growth in the UK by offering government backed 'green bonds' that would attract big investors.”

Photo credit: Alyson Hurt