$3 Billion Sale Of GIB To Macquarie Signals The UK Government’s Commitment To The Green Sector Goes Down Under
Following months of political wrangling, on 20 April 2017 the UK Government announced the consortium led by Australian bank Macquarie has won the auction to buy the Green Investment Bank (GIB) for £2.3 billion (US$2.9 billion). Over the past year, the purchase ran into a great deal of political criticism from the leaders of the Labour, Lib Dem and Green parties, amid fears that preferred bidder Macquarie would asset strip the bank and compromise its environmental mission.
The GIB was initially set up by the UK Government as part of its commitment to support investment in the green economy and in the 2011 Budget it committed to funding the GIB with £3 billion ($3.9 billion) of public money. The GIB’s mission was to act as a catalyst in the investment markets: to “crowd-in” other investors’ money by demonstrating how commercial returns can be made from financing green infrastructure and projects. Its portfolio includes large-scale renewable energy infrastructure, district heating and large-scale energy efficiency projects. Whilst Macquarie has committed to uphold GIB's green investment principles, it is not fully clear how Macquarie will manage GIB going forward.
The sale of the GIB is consistent with other actions that the UK government has taken to water down its intervention in the renewable energy and energy efficiency markets. Back in August 2016, the government abolished the Department of Energy and Climate Change (DECC) and in July 2015 it softened incentives for renewable energy and residential energy services. With an established pattern of weakening government support for different green sectors (much of which was first initiated in 2008-9), energy services providers and renewable energy developers must hone in on the fundamentals of the business case. Today, the challenges are not always around sourcing funding for projects. As Verdantix heard from an energy efficiency project implementer “There is plenty of funding for projects. The greatest challenge is finding attractive energy efficiency projects at sufficient scale.”