Communication for Sustainable Development

Green Investment Bank advised to offer nuclear-free bonds

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Energy executives have welcomed proposals that could see the planned Green Investment Bank (GIB) back nuclear power projects, suggesting the bank could offer customers "nuclear-free" bonds to appease those investors opposed to nuclear energy.

The Environmental Audit Committee yesterday heard evidence from executives from EDF and Scottish Power, the UK Sustainable Investment and Finance Association, and Environmental Industries Commission as part of its investigation on how the GIB should be formed.

Rupert Steele, director of regulation at ScottishPower and Paul Spence, director of strategy and regulation at EDF Energy, urged the GIB to invest in the UK's nuclear power supply chain.

Both companies are planning to build reactors in the UK.

However, the committee said it is concerned that any move to invest in nuclear energy projects through the new bank could result in the government being accused of backtracking on its pledge not to subsidise the construction of new nuclear reactors.

It also voiced fears that using the bank to fund nuclear projects would deter some people from investing in the GIB.

Steele and Spence both insisted that any GIB investment in nuclear reactors should not be regarded as a subsidy, particularly if the GIB operated on commercial terms, investing passively alongside utilities.

Penny Shepherd, chief executive of the UK Sustainable Investment and Finance Association, added that the GIB could still attract anti-nuclear private investors by creating "nuclear-free" bonds alongside mixed investment products.

Compared with large institutional investors, which make investments based on risk of return, she said wealthy individuals were more likely to make investments driven by their values.

"If the GIB was offering bond investment opportunities to the general public, then it might wish to offer both mixed bond opportunities and also bond opportunities that didn't include nuclear," she said.

She also recommended the GIB should follow sustainable banking principles, such as those set out by the Climate Bonds initiative, or United Nations-backed Principles for Responsible Investment.

The government plans to make further announcements on the shape of the GIB at the end of the spring.

Steele urged the government to make sure it delineated between whether the GIB will be a commercial bank seeking long-term returns or a fund that invested in projects with relatively limited returns.

He warned that if it fell between the two poles it would risk operating a weak model that people would not be prepared to invest in.

"Some people have muddled up the two," he said. "I don't think you can have a bank that lends less profitably than necessary to make a commercial return and expect people to invest in it."

Reports that the bank could be used to invest in companies operating in the nuclear industry has this week prompted fierce criticism from anti-nuclear campaigners.

Green Party leader Caroline Lucas slammed the proposals, arguing that investment for nuclear would drain funding away from the kind of emerging renewable energy technologies the bank is supposed to support.

"Nuclear is not green in my view. But it's not new in anyone's mind," she said. "Funding nuclear makes a mockery of the whole idea of a Green Investment Bank and even indirect support – such as cheaper taxpayer-backed loans offered by a bank – still amounts to a subsidy."
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