LONDON (Reuters) - The UK government must ensure its Green Investment Bank has at least 4 billion to 6 billion pounds ($7 billion-$9 billion) over the next four years for low-carbon investment, a group of businesses said on Wednesday.
Britain, which is lagging European Union targets to cut carbon emissions and deploy renewable energy, wants to shift toward a low-carbon economy, including upgrading its grid infrastructure and rolling out electric cars.
More than 20 companies including Bank of America Merrill Lynch, Axa Investment Managers, F&C Investments, Jaguar Land Rover, Microsoft, and British Airways wrote to the government, fearing it could reduce capital for the bank amid spending cuts.
“This (amount) is the minimum required to ensure the bank fulfils its potential to help make the UK a world leader in the supply and deployment of low-carbon technology and the catalyst for a green jobs boom,” the Aldersgate Group said.
Over time, the initial capital could leverage over a hundred billion more pounds of investment from the private sector.
“There are concerns that government spending reductions could starve the GIB of the capital it requires to spark low carbon economic growth and a green jobs boom,” it added.
Government departments have begun the process of setting up the bank, the minister of state for energy and climate change said this month.
The group said funding for the bank should not be at the expense of the UK budget deficit. Capital could be raised from the sale of assets or a carbon price floor in the EU’s Emissions Trading Scheme.
The group said a low-carbon energy transition will only be achieved if over 2 trillion pounds of pension fund and life insurance assets are used to support it.
To achieve this, the bank should be allowed to issue a range of green bonds, designed to give the best possible risk-adjusted returns.
The bank could also design other financial products like Green ISAs, which would be a source of significant additional capital funding to drive forward low-carbon infrastructure development, it said.
A report in June commissioned by the government suggested that the bank could raise up to 10 billion pounds a year in cash by issuing green bonds.
Reporting by Nina Chestney; Editing by Alison Birrane