A new story in Foresight Climate and Energy takes a look at the global proliferation of green banks, and explores different models including that of the now-privatized UK Green Investment Group. It includes insights from CGC International Director Andrea Colnes.
The piece emphasizes the growing reach and impact of these institutions:
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.
It also discusses different ways that green banks can be established and designed. Many green banks are capitalized with public funds, and (although the article does not mention this variation) some can also be funded with philanthropic capital. These institutions can be quasi-public, nonprofit, or private.
In the case of the UK’s green bank, it was established with public funds but was later privatized. The decision gave the private institution more freedom in some ways, but also carried drawbacks which CGC’s Andrea Colnes discusses:
“The primary value-add of green banks in the climate finance architecture is to address gaps in the market and create financial strategies to crowd in and expand private investment by absorbing risk,” she says. “While private green banks can lead the market and demonstrate the viability of green investments, their need for commercial returns would likely limit their ability to fulfill this type of catalytic role,” she adds.
See the full article for more on the ways that green banks drive clean energy investment, and the different examples that exist globally. For an even deeper dive into the forms that these institutions can take, see CGC’s recent white paper on the nonprofit model for green bank design.