E3G has warned there is a “very real threat of an investment hiatus” following the sale of the Green Investment Bank to a consortium led by Australian financiers Macquarie.
The climate change think tank has urged the government to develop new instruments to secure capital for riskier green projects, which the private sector would be unwilling to back on its own.
E3G director Ingrid Holmes told Utility Week she is “cautiously optimistic” that the organisation – now known as the Green Investment Group – will continue to focus on investments in the green economy.
“Half the battle is understanding the technologies and the business model risks,” she said. “They will continue to have the in house expertise to undertake those functions.”
However, Holmes also cautioned that the organisation’s new global remit will mean “less attention on delivering the energy policy objectives in the UK”.
She continued: “Obviously they are looking at global markets now and where transitions are perhaps better defined in Europe or in emerging economies, there’s necessarily going to be a diversion of capacity to look at those new markets.”
In particular, she is “very concerned” that the Green Investment Group will cut back on financing for projects which make use of relatively immature technologies and will therefore struggle to secure financing from elsewhere in the private sector: “There’s quite a significant institutional gap around how we deliver business models that government might wish to be promoting.”
Holmes said the situation has been made even worse by the reported moratorium on investments in the UK by the European Investment Bank (EIB): “The EIB has continued to be a very active and significant investor in the UK. They’re really ramped up their activities around project pipeline development.
“All that capacity which has shown to be incredibly impactful and effective will be lost in the UK just at the time when we’re going to need it most.”
“There is a very real threat of an investment hiatus unless the government comes up sooner or later with some instruments they might use in the absence of these two key institutions,” she added.
Holmes said there are existing investment schemes which the government could utilise: “The two instruments they could think about using at the National Productivity Investment Fund and the guarantee scheme – these are both Treasury initiatives.
“You could look at using both of those fund structures to either take an equity slice or develop a range of credit enhancement risk sharing tools.”
E3G played a major role in the campaign for the creation of the Green Investment Bank, which began operating in 2012.