Yesterday’s article in the Guardian revealed fresh grounds for concern that the government may fail to deliver a real bank with powers to borrow from the capital markets. The State Aid application sighted by the Guardian is indeed a good indication of critical design features of the Bank and once lodged with the European Commission, certain features will not be easy to revise. In particular, the article mentioned further uncertainty that the Green Investment Bank (GIB) will ever be allowed to borrow any time soon – with roll back on the dates previously announced in the official May update for the design of the GIB. 

Without powers to borrow independently from the capital markets – the GIB will not be a bank, but merely another government fund.  The proposals sighted by the Guardian also flag poor design choices for the Bank – in particular, that it will not be granted the operational independence from government that is so critical to minimising policy risk for investors. 

In light of this disappointing news, we must pay even more attention to the legislation that the government will propose first half of 2012. It appears that the GIB is under threat, risking loosing a massive opportunity to unlock large amounts of green infrastructure finance and spur economic recovery for the UK.  To prevent further destruction by this or future governments, it will be essential to lock certain aspects of the GIB’s design into law, including turning promises that the GIB will be allowed to borrow into law. The legislation must anticipate, safetguard and enable a real bank with powers to borrow, and a Bank that operates at arms length from government and enjoys some immunity to political whim. If we see anything less – we may be hard pressed to call the GIB a success, much less a bank.

Read ClientEarth’s report on GIB legislation