Targeted green investment banking is reaching scale. In September 2019, the nine members of the Green Bank Network announced they had committed almost $15 billion of predominantly public capital to mobilise a total of $50 billion towards the low-carbon transition. With a range of different business models and funding structures, green banks are playing an increasingly prominent role in financing the low-carbon transition and numerous jurisdictions around the world are mulling launching their own green finance institutions.
“There is lots of interest from emerging economies wanting to replicate the green bank model,” says Dileimy Orzoco, a policy advisor in think-tank E3G’s international climate finance programme. She highlights that, at a green bank design summit in France in March 2019, around 20 developing countries were represented. “New catalytic climate finance initiatives on the green bank model are moving forward.” The network names countries such as New Zealand, Norway, the Netherlands and the US. As a membership organisation it encourages existing green banks to collaborate, share knowledge and support jurisdictions looking to establish new green banks.
The pioneer in the space is the UK’s Green Investment Bank (GIB). Set up by the Conservative-Liberal Democrat coalition government in 2012 as a public institution, it was privatised in 2016, when acquired by Australia’s Macquarie Bank and renamed the Green Investment Group (GIG).
Ahead of privatisation, GIB executives saw opportunities to break free of some of the restrictions they were operating under as a public institution, such as a requirement to limit investments to the UK and to seek state aid approvals for any expansion of their mandate into new sectors or technologies.
“We are now a global business,” says Ed Northam, GIG’s head of UK and Europe, with existing or planned investments across 25 countries. Two years later, the group has also expanded its technological reach, deepened its impact in terms of capital deployed and is continuing to innovate around green impact reporting. Further, it is helping other jurisdictions establish their own green banks.
“But it has also been an exercise in really deepening the Macquarie Group’s commitment to the sector and turbocharging the group’s activities across the green infrastructure space,” Northam adds. He says the bank has some 400 dedicated staff within the GIG, making it one of the largest environmental investment teams in the world.
Expectations are high that the Principles for Sustainable Banking can push banks to change their balance sheets and businesses in line with climate action and other big societal issues
Energy Cities, a European association of local authorities, estimates a city will need between €1 billion and €3 billion to reach net zero emissions by 2050
Companies and finance providers need legislative frameworks that move everybody in the same direction at the same speed, but they can, and should, do much more themselves to fight climate change