BIS appoints energy efficiency fund managers

UK investment firms Equitix and Sustainable Development Capital are awarded contract to manage £100 million government fund to help businesses finance energy efficiency initiatives

The finance companies have been appointed to manage the funds for UK Green Investments (UKGI), an initiative run by the business department (BIS) as a precursor to the Green Investment Bank (GIB).

While the government awaits EU approval to create the GIB, the UKGI is using private sector fund managers to leverage government money and generate investments from the private sector in green projects.

The energy efficiency fund has been split equally between Equitix and Sustainable Development Capital, and the firms aim to leverage at least another £100 million of private sector investment in small-scale non-domestic energy saving projects, including energy performance contracts and biomass-to-heat schemes.

“The projects the fund managers invest in will help to save energy and meet the government’s carbon reduction targets,” said business secretary Vince Cable, announcing the deal.

“Energy efficiency makes strong business sense while at the same time delivering very high environmental impact,” commented Sustainable Development Capital’s chief executive Jonathan Maxwell. “This new fund will enable us to address the UK market with the much needed capital and know-how required to unlock compelling energy efficiency opportunities that are not otherwise being taken.”

In addition to financing energy efficiency projects, the UKGI is providing investment funds for offshore wind, waste processing and recycling, energy from waste and the forthcoming green deal.

In April, the UKGI appointed Foresight and Greensphere to manage £80 million of investments aimed at greening the UK’s waste infrastructure.

However, as investments roll out under the UKGI, environment groups, including think tank Green Alliance and WWF UK, in a letter to ministers they ask for the legislation that will govern the GIB to be amended to allow it to borrow money as soon as possible.

Under the regulations as they are currently drafted, the bank cannot borrow money until the UK’s deficit has been reduced. According to the green groups the latest economic projections mean that the GIB won’t be borrowing until 2016/17 at the earliest.

Without the ability to borrow, the GIB is a fund and not a bank, the groups argue, and the government is failing to live up to its promise to create a public financial institution backing green growth.

“The link between national debt levels and GIB borrowing powers was made when the government had very different economic forecasts. It should now be discarded,” the letter states.