EXCLUSIVE report by Scottish Energy News
The UK Government has announced that the UK Green Investment Bank will create a ‘special share’ in the company as part of the process to introduce private capital to the organisation.
This ‘special share’ is being created so as to ensure that the bank remains true to its renewables objectives when privatised by the Govt. later this year.
However, the ‘special share’ is entirely silent on the location of the head office of the Green Investment Bank – which has triggered fears in the Scottish Government that the lure of London will prove irresistible to GIB and that its head office will be re-located out of Scotland when privatised.
The special share will be held by a separate company independent of both GIB and the Government. The Edinburgh-based bank would not be able to make changes to its ‘green mission,’ as set out in the Objects of its Articles of Association – unless this Special Shareholder agrees.
The bank’s ‘green mission’ requires each individual GIB investment to contribute to meeting one of five ‘green purposes’ and a wider portfolio which makes a positive overall reduction in greenhouse gas emissions; namely;
- The reduction of greenhouse gas emissions
- The advancement of efficiency in the use of natural resources
- The protection or enhancement of the natural environment
- The protection or enhancement of biodiversity
- The promotion of environmental sustainability
UK Business Secretary Sajid Javid explained: “Moving the Green Investment Bank into private ownership makes sense. If you want it to have access to more capital, to make bigger investments and have a bigger impact in green sectors it is the best course of action. To ensure the bank’s green credentials are maintained it plans to put a special share structure in place that protects its green mission and keeps it focused on what it does best.
Lord Smith of Kelvin, Chairman of GIB said: “I have always been confident that any new investor in GIB will be strongly committed to our green mission – our commitment to, and expertise in, green investment is the very reason they would be investing in us. That said, I understand the concern among some of our stakeholders over the legislative changes, so I am delighted we have been able to offer them the additional commitment that a special share will bring.”
John Swinney, Scotland’s Deputy First Minister sought assurances from the UK Govt. that the GIB ‘green purpose’ – and its Edinburgh headquarters and jobs would be protected as part of GIB’s privatisation. There has since been further dialogue with UK Government, culminating in a letter from the Secretary of State on 3 November 2015 confirming that UK Government is committed to the retention of the ‘green purpose’ of the GIB.
The Scottish Government has also received a letter from the Chair of the Green Investment Bank, Lord Smith of Kelvin, dated 12 November 2015 which sets out the continuing ‘commitment’ of the GIB‟s Board to retaining its headquarters (with 50 associated jobs) in Edinburgh following privatisation.
But in his latest letter to John Swinney, Javid said: “The aim of the measure is to repeal the provisions in the Enterprise & Regulatory Reform Act (ERRA) 2013 relating to the UK Green Investment Bank (GIB). It is now clear that repealing this legislation is necessary to achieving our objective of enabling GIB to be re-classified as a private sector enterprise rather than a public sector body once we move GIB into majority private ownership.”
But nowhere in his letter does Javid commit to, nor mention, the ‘special share’ being used to ensure that the Green Investment Bank retains its head office in Edinburgh.
Ergo, this issue of where the head office is based becomes simply an ‘operational’ decision for Shaun Kingsbury, Chief Executive, Green Investment Bank – who will no longer be publicly accountable to the UK Govt.
But Kingsbury said: “Some people have concerns about the <privatisation> announcement. They are worried a reduction in the Government stake might reduce our commitment to our green mission or create uncertainty over our Edinburgh headquarters and the jobs we have here.
“I understand these concerns. But I believe we can successfully attract new investors while remaining every bit committed to our mission and our Edinburgh headquarters.”
From a renewable energy perspective, the WWF welcomed the ‘special share’ deal for the bank.
A spokesman said: “WWF has lobbied hard for GIB’s environmental objectives to be firmly enshrined in the bank’s new governance structure.
“This announcement is an important step towards ensuring the GIB’s success in promoting green enterprise will be built on, not watered down. The GIB also needs an appropriate shareholder base to deliver long-term investment and help it address market failures. Therefore the Government should keep a significant minority interest, and continue to be an active shareholder.”