Legislation obligating the Green Investment Bank (GIB) to invest only in environmentally friendly projects will have to be repealed before privatisation goes ahead, business secretary Sajid Javid said.
In a written ministerial statement, Javid said that, in order for the GIB to be reclassified as a private sector enterprise, the controls imposed on it by the Enterprise and Regulatory Reform Act 2013 need to be repealed.
If this did not happen, there is a risk that the GIB would still be subject to government control over how it raises capital, Javid said. The need to repeal the legislation has only come to light since the decision was taken to privatise the bank, he added.
The business secretary insisted that the bank would continue to invest in green projects, however. He said the government "wants and expects" a privately owned GIB to continue its focus on the low-carbon economy. "It is clear from preliminary feedback that potential investors are interested in acquiring a stake in GIB precisely because of its unique green specialism and its green-focused business plan.
"As part of any sale process, we would expect potential investors to confirm their commitment to the GIB's green values and to set out how they propose to ensure these are protected," Javid said.
The government announced its intention to privatise the bank in June, saying it wanted the GIB to be free to borrow without the money being classed as public sector debt, and insisting that privatisation would allow the bank to lend to a wider range of sectors and have greater impact in mobilising investment in green projects.
According to Javid, sections of the 2013 Act that relate to the bank will be repealed through an amendment to the Enterprise Bill to be tabled at Lords committee stage.
E3G, the think tank that originally developed the idea of the GIB, said that the move would make the bank a competitor rather than a multiplier of private investment.
It called for the government to guarantee that the GIB will retain its statutory purpose to overcome market failures affecting financing of the UK's green infrastructure.
Nick Mabey, chief executive of E3G, said: "Creating the GIB was among the most successful environmental and economic initiatives of the previous government. Widely copied around the world, it has invested £2 billion of public money in 50 projects, leveraging an additional £6 billion in private capital and generating a return on investment of 9%."
Earlier this week, the GIB announced that its renewable energy fund had reached £818 million, close to its target of £1 billion, after a second round of fundraising secured investment of £355 million for its offshore wind fund.
Karl Smith, fund managing director at the GIB, said that confidence is growing from domestic and international investors in well-developed and managed offshore wind assets in the UK. "We are in advanced discussions with other potential investors and progressing quickly towards final close and reaching our £1 billion target."
