Will The Green Investment Bank Kickstart The Renewables Market?

Will The Green Investment Bank Kickstart The Renewables Market?

by Rebecca Hall on 18 Feb, 2012

Now that the much lauded Green Investment Bank has finally got the go ahead from government, investors are considering whether this means entry into the renewables market is becoming a better idea.

Previously, although many support the renewables market in principle, lack of support has made it an inevitably lesser investment than traditional energy sources such as oil. The government (and those operating in green technologies) are hoping that the Green Investment Bank will not only help support the green sector off its own back, but encourage more private investors to get involved.

The precise details of the bank are not yet known, however, what we do know is that the bank will start with a guaranteed £3 billion in government funding, with the ability to borrow from the capital markets come 2015. There is much speculation as to what, if any, restrictions there will be on attracting private sector cash, but it is clear that if the bank is to make any difference at all it will need to encourage private sector involvement. After all, £3 billion is a relatively small amount.

Presumably the hope is to encourage private investors to invest in renewable energy and green technology via two paths: either through the bank itself, or directly into green businesses having made the sector as a whole more appealing. As we all know, investment is very much a virtuous cycle – the more investment green technologies attract, the more investable they are likely to become.

Most investors will be adopting the ‘wait and see’ approach to the bank, and may well want to see what affect it has on the green sector before 2015. However, the savvy investor will be asking the question already – will the Green Investment Bank kick start the renewables and green technology sector? Getting in now could spell substantial rewards once the effect of the bank kicks in. Then again, like so many government environmental initiatives, it could turn out to be little more than a damp squib.

About the Author

Rebecca Hall

Rebecca Hall worked as an independent mortgage adviser for 10 years before turning to financial journalism full time. She has strong links to the CAB advising families on mortgage refinancing.