My last blog highlighted an opportunity for the Scottish Government to take action no matter what the outcome of the referendum on September 18 and this one is the same. No matter whether we are heading for independence or sticking with the Union, there is a strong case for co-funding the Green Investment Bank.
This is another recommendation from Smaller, Greener Banking the paper I produced for Friends of the Earth Scotland.
Scotland’s Future, the White Paper on independence, said that the Scottish Government would expect the Green Investment Bank, to remain headquartered in Scotland. The fact that it is based in Edinburgh at all is down to the determination of its chairman, who despite his grand title, Lord Smith of Kelvin, is a Maryhill boy made good. At the time of writing he has not made any public statement about his views on independence, but I think I know him well enough to believe he would resist uprooting the two-year-old institution merely to make a political point.
It will not be within his gift, however, and in the event of a Yes vote the location of the bank would have to be the subject of negotiation, like so much else in the White Paper. For continuity reasons, apart from anything else, it would be desirable for the bank to stay where it is, rather than uprooting its staff this early in its life.
But funding and where it invests could be another matter. Currently the bank is financed entirely by the UK Department of Business Innovation and Skills, which has committed £3.8 billion. The bank invests throughout the UK, but it is difficult to see politically how it could continue to fund projects north of the border if Scotland were to become a separate country unless the Scottish Government also made a contribution.
In fact it would be highly desirable for this to happen, whether Scotland becomes independent or not. The rate of investment needs to be stepped up and adding more capital would help to achieve this.
The Green Investment Bank was established to help finance the UK’s transition to a sustainable economy, not only by financing projects directly but by encouraging others to invest alongside it. To reach our emissions targets will require huge investment, but so far we have only been providing cash at half the necessary rate.
In its two-year life the bank has committed £1.3 billion of its own capital, but also brought in £4.8 billion from co-investors. It has been given a lot of money, but nowhere near enough to tackle the scale of the problem. In fact it has been running hard, while investment in renewables over the past few years has been going backward. This is not just a UK phenomenon, but is apparent across Europe, where there has been a 64% drop since 2011.
In the UK there was a fall in renewables investment of 11%. Without the bank’s intervention the fall would have been 30%.
The bank is also attempting to take a leadership role in stimulating more investment in renewable technologies by raising a fund to bring in a wider range of investors. It has recently received state aid clearance from the European Commission to invest directly in community schemes, something it has not been able to do until now. It deserves encouragement and cash.