Climate minister Greg Barker says flagship UK green fund will be allowed to invest in developing countries
Pic: Department of Energy and Climate Change
By Ed King
The UK government has announced plans to allow its national Green Investment Bank to back projects in developing countries, using money from its £3.87bn International Climate Fund.
Climate and energy minister Greg Barker said the GIB will initially pilot one low carbon initiative, leveraging support from private investors.
“We are exploring taking the GIB overseas, to allow it to work in exciting new developing markets, opening up the bank internationally and helping us deliver on our commitments to the developing world, commitments made in Copenhagen,” he said.
“It’s important to demonstrate to sceptics in the developing world there are real commercial returns to be made by investing in clean energy in developing countries.”
Barker said the move would not involve any new allocations of UK climate finance, emphasising the GIB’s current pot of £3.8billion would remain reserved for domestic projects.
In an emailed statement the bank’s chief executive Shaun Kingsbury welcomed the announcement, saying expertise gained since its launch 18 months ago would be applicable overseas.
“The commitment at this stage is to explore options through the development of a business plan,” he said.
“We would only proceed if we are confident that this additional responsibility is complementary to and in no way compromises our core mission to build a greener, stronger economy in the UK.”
Speaking at an event in London hosted by the IPPR thinktank, Barker added the UK is now exploring a number of avenues to allow it to boost its global climate finance commitments.
In 2009 at UN talks in Copenhagen developed countries committed to raised $100 billion a year by 2020 to help poorer parts of the world invest in clean energy and prepare for climate impacts.
So far rich countries are well off hitting that goal, with research from the Overseas Development Institute (ODI) indicating pledges to climate funds were 71% lower in 2013 than 2012.
UN Secretary General Ban Ki-moon has asked world leaders attending his climate summit this September to deliver new funding and carbon cutting measures. UK Prime Minister David Cameron said today he or ‘a senior minister’ will attend.
Ambitious goals
Barker said he wants the GIB overseas arm to model itself on Germany’s KFW, a government-owned development bank based in Frankfurt.
KFW raises the majority of its finances in the international capital markets, with some bonds covered by central government.
In 2013 it delivered €72.5 billion of funding, 38% of which was targeted at ‘environmental and climate protection’, according to the bank’s website.
With the low carbon market estimated to hit $5 trillion by 2015, Barker stressed he sees the GIB working closely with the UN’s nascent Green Climate Fund, which is due to come online later this year.
It is due to benefit from the bulk of climate funding from governments and the private sector, but some analysts say a more aggressive GIB working overseas could undermine it.
“The GIB will not be competing with the GCF,” Barker said.
“The UK is a strong support of the GCF; we’re keen to solve the governance issues and get a robust structure we can all have confidence in and get on and capitalise the GCF, certainly we need that done by Lima at the end of the year. I see them as natural partners rather than competitors.”
Amal-Lee Amin, a climate finance expert with London-based consultancy E3G welcomed the news, but said markets and developing countries are likely to withhold judgement until more details emerge.
“This is a positive development, maximising the expertise in the Green Investment Bank for the benefit of the ICF, but it’s important for the GIB to partner with the Green Climate Fund for delivering scaled up finance for transformational impact in developing countries,” she said.