This speech was made on Thursday 25 June 2015 and followed the Secretary of State’s announcement that the UK Government intended to move GIB into the private sector.
The announcement from the Business Secretary today, on behalf of the UK Government, marks an important moment for us.
I want to use my time with you today to set this news in context by taking a decade long view of the UK Green Investment Bank; starting with the commitment to create us, and looking forward to the organisation that I believe we can and will have become, five years from now.
Today, we stand at an important transition point for GIB – half way through that decade. A point where we move from being a youthful ward of the state, reliant on Government support, to being an enduring institution, well on the road to self-reliance and self-finance.
This is a moment we always expected to reach – or at least we hoped we would.
It is a transition driven by necessity. Our long-term growth, in the shape of greater investment in a wider range of green infrastructure projects and sectors, demands access to more capital.
The financial backing of Government has been vital but it was only ever intended to be a start - one we always knew we would need to build upon.
Equally, we will only be able to build on our success so far with Government continuing to hold a significant stake in the organisation.
So, if we are to take the long view, and look at the point we are at today in its proper context, we should begin at the beginning.
Five years ago, in 2010, the new Coalition published a Programme for Government which included a commitment to ‘create a Green Investment Bank’. Many of you here today were instrumental in the work building up to that.
Half way between then and now in October 2012 – six months after I joined as Chair - we formally launched the Bank. At that point we had an idea, two dozen people and a huge amount of energy and ambition.
The idea was underpinned by a mission that would guide what we would do and how we would do it.
This combination of ‘what’ and ‘how’ lies at the heart of our business. Let me take both in turn.
First, what we do.
We are an organisation with a crystal clear mission at our heart: tackling climate change by decarbonising the UK economy.
This mission is enshrined in an Act of Parliament which sets our five green purposes. These purposes, like reducing greenhouse gas emissions, are hard wired into the organisation and underpin everything we do.
Our mission of decarbonising the UK economy is not a narrow one. We are investing in ways that will:
- Increase the UK’s energy supply and reduce demand;
- Strengthen the UK’s energy security,
- Improve the efficiency of the UK’s economy,
- Modernise the UK’s infrastructure, and
- Help to capture the economic benefits, and jobs, from a new industrial sector with a huge global value.
This is all critical to the UK’s productivity, competitiveness and long term economic success.
This mission defines us. It is what we do. And you will hear much more detail on our progress towards our mission throughout the rest of the morning.
But GIB is defined not only by what it is trying to do, but by how it is doing it.
- We are an organisation set up with a mission at its heart and a clear public policy objective in our sights.
- We were created by Government to tackle a market failure by working in partnership with the market.
- We work to a double bottom line of being green and profitable.
- We work with a strongly commercial ethos underpinned by a deep commitment to public accountability and transparency.
- We were formed under the wing of Government and capitalised by public money but designed to emerge from that and take flight on our own.
So, not just a public institution, but a business: a business that makes money.
We have never been shy about that. It is central – vital - to our success. If we can demonstrate the profitability of green infrastructure investment we can create a positive demonstration effect that will attract the deep pools of private capital needed to match the scale of the challenges we face.
As we go through the morning and as you read through our Report please give a thought to ‘how’ we have invested as well as ‘what’ we have invested in.
To avoid stealing the thunder of those who follow I will only pick out what I think are four highlights from the past year.
- First, we backed more green infrastructure projects with more capital than ever before. We also expanded the number of sectors we invest in.
- Secondly, we moved into profitability. An important and proud moment.
- Thirdly, we began to manage other people’s money for the first time, reaching first close on the world’s first offshore wind fund, drawing investment from a major sovereign wealth fund and UK pension funds.
- And lastly, we agreed terms on a pilot programme to extend our activity to beyond the UK and into South Africa, India and parts of East Africa.
These are all key strategic developments that create the stepping stones that will take us from the business we are, to the one we want to become.
I wanted to give you a sense of my vision for what that business could look like in five years - a decade on from the commitment to create GIB.
In five years’ time, the year 2020:
- We will have been committing capital for almost eight years. Even if we are only matching our current investment run rate of £800m to £1bn and our mobilisation ratio of £1 from GIB to £3 from the private sector, we could have directly committed £6bn of capital to projects worth £24bn.
- Our direct commitments could be supplemented by additional funds under management, building on our first success in raising a fund last year.
- We will have made a very significant contribution towards the UK’s 2020 climate targets.
- We will have five years of profit making performance under our belt.
- That profitability will have made it possible to attract significant new private capital into GIB itself, moving on from our current position of 100% Government ownership;
- A reduction in the Government’s shareholding will take us off the Government’s balance sheet, allowing us to borrow from the market.
- Taken together, this new equity and borrowing will significantly expand the capital we can invest in projects;
- The introduction of private capital will have removed the state aid restrictions we currently operate within, allowing us to invest in every type of green infrastructure – from rooftop solar to electric vehicles.
- We will have completed a successful overseas pilot and be operating in a variety of foreign markets.
This is an obviously ambitious plan, but it is not a pipe dream. I have been Chairman for three years now and, last month, was appointed for another three years by the Business Secretary. By the end of that term I believe we will be well down the path to achieving all that I have set out.
Now, this transition will not be easy and must be treated with great care. I know some of our stakeholders will have concerns, I would expect no less. I also fully expect them to hold us to account as we do it.
They should know that our founding mission will remain at the heart of GIB. That is not just an assurance from me – our five green purposes are written into statue and will remain that way. We are constitutionally bound to our mission: to help move the UK towards a low carbon economy.
This passing of the baton from Government to the private sector is emblematic of what needs to happen, more broadly, in the area of climate change.
If we are to keep the world’s temperature increase to below 2 degrees centigrade - and we must - the actions must be led by the private sector, backed by strong, consistent support from Governments, across the world.
As the Prime Minister said earlier this month: “It’s time the market got to work on climate change.”
I agree. And we have built a business based on that premise.
It is a business that is admired and is being replicated across the world. While the UK Government led the world in creating the first green bank, others have followed. We have founded a network of over a dozen existing or emerging green banks. A network which will play an important role in delivering the emboldened vision we all hope emerges from Paris later this year.
I should add that the Prime Minister, and the wider Government, has been an excellent shareholder and we were delighted to welcome him to our Edinburgh headquarters on one of his first visits after his re-election.
As we set off on the next phase of the GIB story I will leave you with one promise.
We will manage the evolution of the bank with the same commitment to accountability, transparency and engagement that we have demonstrated throughout our existence so far. Our business has been strengthened immeasurably by fully embracing these important principles, and I hope we can continue to count on you to play your valuable role in this ongoing two-way dialogue.
Thank you all for your support and your robust challenges, I am sure we will see plenty of both in the Q&A later this morning.
Now, let me handover to the man who has to deliver all of this, our excellent Chief Executive Shaun Kingsbury.