Criticism of the government’s planned sale of the Green Investment Bank (GIB) has continued to build after its own environment watchdog warned that privatisation should not go ahead unless the bank’s green remit can be protected.
Earlier this month the Department of Business, Innovation and Skills (BIS) confirmed that in order to pass the GIB into private ownership, it would have to repeal legislation that ensures the bank is used for green infrastructure projects. The Environmental Audit Committee has now published a report claiming the GIB’s green identity should be “the most important objective of any sale” and that if this cannot be maintained, the government should not proceed with the sale.
BIS has claimed it intends to ensure private investors retain the banks’ green activities by asking them to confirm their commitment to GIB’s green values and investment principles, and to set out how they propose to protect them. It has also claimed that the success of the bank in green projects – having mobilised over £10 billion of investment since 2012 – will be enough to convince investors to continue in this vein.
However, in its report the Environmental Audit Committee claims: “We do not believe that the government’s two proposed protections of this identity, relying on the commercial case for retaining GIB’s green purposes and assurances sought from potential shareholders, are robust enough to protect GIB’s green purposes.”
Committee chair Huw Irranca-Davies MP added: “The Government is currently relying on assurances from potential shareholders and the commercial case for retaining the GIB’s green purposes. That is not robust enough.
“The government must ensure the GIB continues to do what it says on the tin. If the government cannot guarantee that the GIB will retain its green purpose in the private sector then the sale should not go ahead.”
The committee has recommended that instead of shedding its entire stake, the government must implement stronger protections for the green purposes of GIB than those already set out. It suggests a special share be established and owned in a way which does not prevent re-classification to the private sector. This would be used to ensure the longevity of the green purposes and protect against the watering down of the bank’s green investment activities.
This recommendation is similar to an amendment added to the Enterprise Bill, which will enact the planned changes to the GIB, which suggests the appointment of “green guardians” appointed by the Committee on Climate Change to watch over the bank and make sure its objectives do not change.
The report has also criticised the government for its preparations for the sale, claiming that while prolonged debate and consultation was carried out when setting up the bank, this has not been reflected in the upcoming privatisation.
It states: “The government has taken the decision to privatise GIB without due transparency, publication of relevant evidence, consultation, or proper consideration of alternatives. The absence of these steps is likely to lead to the suspicion that the move and its timing are not evidence-based policy.”
This view was backed up by witnesses invited by the committee to take part in the report. Environment think tank ESG said the government had “failed to make a compelling case” for the sale of its majority stake, while WWF-UK said the deal was “progressing unnecessarily quickly and quietly, with little information being available about the ramifications”.
The committee has therefore called on the government to publish a robust businesses case and impact assessment in support of the decision to sell and the timing of the sale. It has also cast suspicion on whether or not the government considered a range of refinancing options for the bank, and asked for evidence proving other alternatives for recapitalisation were considered. If they were not, the committee has demanded the government explain why.
Finally, the committee has pointed to the potential for the deal to undermine the government’s commitment to the green economy, particularly in light of the recent agreements made at the COP21 summit in Paris. A raft of green policies have been either removed or significantly reduced since the Conservative government was elected – most recently the changes to the solar feed-in tariff – with the sale of the GIB thought to be a sign of a further shift away from green investment.
The report has recommended the government demonstrate how the privatisation of the Bank will contribute to the balance of public and private sector initiatives required to meet the ambitions of the Paris climate change agreement.
In response to the Environmental Audit Committee’s report, a spokesperson from BIS said: “We will look carefully at the Committee’s recommendations and respond in due course.”