On 25 May 2012 the draft Enterprise and Regulatory Reform Bill had its first reading in Parliament. Amongst other measures, the Bill provides powers to the Government to designate formally the Green Investment Bank (“GIB”), to provide financial assistance to the GIB and to secure its operational independence from Government. The proposed target for the designation is the UK Green Investment Bank plc, a public company limited by shares which was incorporated on 15 May 2012 and which must be wholly owned by the Crown at the time of designation.
The proposed legislation sets out 2 criteria which must be met before the GIB can be formally designated (the designation will be by a separate Order). Firstly, the Secretary of State must be satisfied that the GIB’s objects set out in its articles of association are such that the GIB would engage only in activities that involve, are incidental or conducive to, making, facilitating or encouraging investments that the GIB considers likely to contribute to the achievement of one or more of the “green purposes” in the UK.
Secondly, there must be laid before Parliament a copy of an undertaking (known as the “operational independence undertaking”) by the Secretary of State to the GIB, the purpose of which is to ensure the GIB’s independence from Government and allow the GIB’s to act as its directors consider appropriate in the light of the objects.
The proposed green purposes for the GIB are:-
- reduction of greenhouse gas emissions (as defined in the Climate Change Act 2008);
- advancement of efficiency in the use of natural resources;
- protection or enhancement of the natural environment;
- protection or enhancement of biodiversity; and
- promotion of environmental sustainability.
The second reading of the Bill is scheduled for 11 June 2012.
Subject to the Parliamentary process and state aid approval from the European Commission the GIB is expected to be operational this autumn. In the meantime pending the formal designation, a number of investments are already being targeted directly by Government to trigger financial activity via fund managers. Of a number of proposed investments, recently two specialist fund managers have been appointed to make and manage investments in small scale waste infrastructure sector. For this tranche of investment £80m funding is to be made available which will be match funded. Separately a further £100 million is to be made available for investment in the non-domestic energy efficiency sector, the management of which is to be announced this summer. Other targeted funding is expected to be announced.