UK cities have entered into a heated competition for a chance to host the country’s Green Investment Bank. Environmental Finance last week reported that 32 towns and cities have placed their bids to provide space for the world’s first investment bank solely dedicated to greening the economy.
“Aside from front-runners such as London, Edinburgh, Leeds and Manchester, bids were received from unlikely candidates such as the seaside town of Torbay, the market town of Bicester and new-town Milton Keynes,” Environmental Finance noted.
The UK government created the Green Investment Bank initiative in an effort to move the country towards a more environmentally friendly economic model. Financial experts speculate that, in order to meet its climate change and renewables targets between now and 2020, the country needs approximately £550 billion in green investments. The funds needed for greening the energy system alone are estimated to be as much as £200 billion.
UK Department for Business, Innovation and Skill (BIS)
“[The bank’s] mission will be to provide financial solutions to accelerate private sector investment in the green economy. Capitalised with £3 billion, the GIB will play a vital role in addressing market failures affecting green infrastructure projects in order to stimulate a step up in private investment,” says an official statement on the website of the UK Department for Business, Innovation and Skill (BIS).
Among the first priority sectors to receive loans from the green financial institution will be offshore wind power generation, commercial and industrial waste processing and recycling, energy from waste generation, and non-domestic energy efficiency.
But beyond funding projects aimed at greening the environment, the Green Investment Bank will bring about numerous opportunities and economic benefits to the lucky city or town that will win the bidding war. As BIS noted in their statement, the UK government pledges to make an initial investment of £3 billion until 2015. The bank will be expected to raise its own funds thereafter.
Competing cities and town are well aware of the perks that having the bank on home soil will bring to their economies. Documents submitted by the campaigning team of Manchester, one of the front-runners in the race, clearly show the impact that the bank is expected to have on the local economy. City officials estimate that the new institution would employ 50 workers expected to make an annual contribution of about £45,000 each to the local economy, plus another 25 adding £37,000 each. As a result, the total economic benefits that Green Investment Bank may bring to Manchester would amount to £3.15 million a year.
Green Investment Bank
In an effort to boost its own regional economy and green investment sector, the small town of Bicester isn’t afraid to go toe-to-toe with the high rollers. The Oxford Times reported earlier this week that the town’s MP Tony Baldry stood firmly behind the bid to host the bank, affirming that the town’s eco status and strategic location meant that Bicester was the perfect choice.
So what does it take to get a piece of the multibillion-pound government investment pie? For starters, contenders will have to show that they are able to recruit and retain skilled staff who will efficiently run the bank’s operations. The successful location will also need to demonstrate that it can effectively collaborate with external stakeholders, such as investment bodies, project developers and managers and cleantech providers. And last, but not least, the potential winner needs to demonstrate that the bank will be run in a cost-effective manner where the returns outweigh the set-up and operational expenses.
It is expected that the final decision around Green Investment Bank’s host city will be announced this month, and the bank will start lending money to businesses as early as April of this year. From 2015-2016, the bank will be given full powers to borrow funds.