The UK government is poised to reveal plans for a new state-backed green bank to help finance Britain’s climate ambitions, three years after ministers agreed to sell the UK’s Green Investment Bank.
Kwasi Kwarteng, the energy minister, said that he expects the government to set out how it plans to create a successor to the Green Investment Bank “in the not-too-distant future”.
The move to rebuild a new green lender comes amid growing calls from climate campaigners, economists and academics to invest in green infrastructure to help revive the UK’s struggling economy and help meet its climate targets.
The government sold the UK’s original Green Investment Bank to Australian bank Macquarie in 2017, only five years after it was formed, in a controversial deal dubbed “deeply regrettable” and “politically dubious” by critics of the sale.
At a digital event hosted by climate campaign group UK100 on Monday, the minister said it is “no secret” that there is “an ongoing debate within government about how we can in effect create the Green Investment Bank 2.0”.
“I fully expect there may well be announcements in that regard in the not-too-distant future,” Kwarteng added.
The minister said that the UK’s commitment to build a “net zero carbon” economy within 30 years, and the “huge amount of investment” needed to reach this goal, “suggests that there may well be scope” for a new green development bank.
He added that his personal view favoured a bank that focuses on the consumer and suggested that a bank similar to Germany’s state-owned development bank KfW, which was set up in the wake of the second world war to invest in infrastructure, could facilitate this.
Polly Billington, the director of UK100, said business and banks should take on a much bigger role in “building back better”.
“Green investment will create thousands of jobs, tackle climate change and secure the recovery. Our research with Siemens found that investing GBP5bn in renewable energy could unlock GBP100bn of private capital. We look forward to working with the government to make this happen,” she said.
Researchers at the Grantham Institute, part of the London School of Economics (LSE), have called for ministers to plough GBP20bn in paid cash towards a new national investment bank to establish a pipeline of clean infrastructure projects including carbon capture and hydrogen.
The new report, commissioned by the Aldersgate Group, proposed the state-backed bank alongside a string of near-term public investments and long-term, low-carbon strategies.
The recommendations include funding for energy efficiency upgrades, tree planting and wetland restoration to boost Britain’s green recovery and help create new jobs and training opportunities.
The report’s four-prong approach also set out a “low carbon skills” strategy to level-up workers who might be left underemployed or unemployed following the pandemic, and a long-term framework for low-carbon investment using a rising carbon market price to incentivise private investments.
Dimitri Zenghelis, a senior visiting fellow at the LSE and the co-author of the report, said: “The government has made a good start with the summer statement and early stimulus measures will help shore up a more resilient economy over the next two years. But the government must now turn its rhetoric on green recovery into predictable and credible commitments to build a sustainable economy over next decade and beyond.”