In just over two years from its launch, the UK’s Green Investment Bank has invested £1.8 billion in 41 projects around the country. These are large sums, but still far from what is really needed to decarbonise the economy. Some observers say the green bank isn’t yet fulfilling its potential, for various reasons, among which the fact it can’t borrow in order to bring more money into the sector.
But the bank must be doing something right. Apparently there are now plans, at different stages of development, to launch similar institutions in seven countries across three continents. In the United States alone, projects to set up green banks are in place in six states. Or at least this is what the bank’s officials told me when I recently interviewed the head of investment banking there, Edward Northam, for Sun & Wind Energy magazine.
Northam explained the organisation’s offshore wind strategy: this sector has taken just under half of the bank’s existing investment, while the rest has gone to bioenergy, energy efficiency and energy from waste. He is now working (first close is apparently imminent) on the new offshore wind investment fund, which the banks says is the first of its kind in the world.
The idea behind this new fund is that new sources of capital for offshore wind could become available (with potential implications for other parts of the renewable sector). This is important because if we want to achieve rapid growth of renewables to meet global climate change targets, these technologies need to be deployed much faster. In particular, while there is plenty of money moving around the world and investors looking for good returns, the portion of investment going to renewable energy and energy efficiency needs to grow.
The hope is that the bank, through its new fund, will soon be able to offer “equity stakes” (or shares) in operational wind farms as a good opportunity for investors seeking long-term, inflation-linked returns, including long-term infrastructure investors such as sovereign wealth funds and pension funds. These are currently sitting on very large sums of money and if they started to invest more heavily in renewables it could make all the difference in the world.
Read the rest of the Q&A with Edward Northam here.