What Is A Green Bank?

Here to help communities move away from fossil fuels and develop resilience against climate change are a new type of financial sponsorship: Green Banks.

A Green Bank is a publicly capitalized entity established specifically to facilitate private investment into domestic low carbon, climate resilient (LCR) infrastructure, and other green sectors such as water and waste management.

Such dedicated green investment organizations have been established at the national level (Australia, Japan, Malaysia, Switzerland, United Kingdom), state level (California, Connecticut, Hawaii, New Jersey, New York and Rhode Island in the United States), county level (Montgomery County, Maryland, United States) and city level (Masdar, United Arab Emirates).

Green banks are institutions whose mission is to use innovative financing to speed up the transition to clean energy. The focus is to deploy clean energy rapidly rather than maximize profits.

It’s important to note that green banks don’t give money away as grants – instead, they lend money at low or no interest rates to fund projects that have passed the research and development phase and proved to be technically feasible with a payback opportunity.

Green energy solutions seek to limit or reduce carbon emissions and industrial pollutants that reduce our quality of life. Some green banks also serve low-income communities or raising resiliency.

Green Banks have various purposes and goals that include:

  • Meeting ambitious emissions targets
  • Mobilizing private capital
  • Lowering the cost of capital
  • Reducing energy costs
  • Developing green technology markets
  • Supporting local community development
  • Job creation

These goals are measured and monitored by performance metrics Green Banks use to demonstrate accountability: emissions saved, job creation, leverage ratios (i.e. private investment mobilized per unit of GIB public spending) and, in some cases, rate of return.

Green banks, as autonomous institutions, have the independence to be flexible and react to real-world conditions. If a new clean energy approach looks good on paper but doesn’t pan out, it can be scrapped and other avenues explored.

Timing is everything and green banks are charging forward, partnering with innovators to replace dirty energy with clean, “green” alternatives.

Green bank projects in 2020 include:

  1. Buheii Wind Farm – Norway

On April 29, 2020, Green Investment Group Ltd (GIG) acquired the Buheii Onshore Wind Farm from the world’s largest independent renewable energy company, Renewables Now (RES). This 79.8 MW (megawatt) project is located in Kvinesdal, southern Norway. The processing plant at Kvinesdal is an undisputed leader in energy recycling and customer satisfaction. The plant emits only 20 percent of its licensed maximum due to internal restrictions that are stricter than the limits allowed by the Norwegian Environment Agency.

A January announcement indicated that GIG’s Buheii project would provide power to Eramet Norway until 2038, ensuring a stable and long-term power supply to Eramet’s manganese smelters. With an electricity demand of more than 2 TWh (terawatt-hour) annually, the company depends on long-term, predictable power to provide stable and efficient operation in its processing plants in Porsgrunn, Sauda, and Kvinesdal.

Two Nordic companies have been selected to complete the main civil and overhead lines works. The groundwork is due to start in the coming weeks and continue for about a year. Construction activities are expected to employ 80–100 workers.

  1. Newhurst Energy-from-Waste Facility – UK

In February 2020, Green Investment Group (GIG) and Covanta Holding Corporation agreed to own 50 percent of the state-of-the-art waste processing facility at Newhurst, UK, with Biffa, the facility’s primary waste supplier to own the remaining half of the project.

The Newhurst EfW (Energy from Waste) facility supports the government’s resolve to both reduce reliance on landfills and treat more non-recyclable waste domestically rather than depend on export to European facilities.

The facility will use proven technology to provide up to 350,000 tonnes of annual treatment capacity for non-recyclable waste and will also generate up to 42 MG of electricity, enough to power about 80,000 homes.

  1. Green Affordable Housing – Kenya

In January 2020, UK Climate Investments (UKCI) announced its intention to invest up to $39 million to finance the construction of affordable green housing in Kenya. The construction and development of some 10,000 energy and water efficient homes in Kenya will be made possible by a locally-managed strategy targeting $80-250 million of investor commitments.

UKCI seeks to embed green standards in the Kenyan market by introducing environmentally sustainable building design. The commitment will also support the creation of a new green asset class for local investors, mobilizing Kenyan institutional capital to invest further in the sector.

Access to affordable housing remains a significant challenge in Kenya, where an estimated 36 percent of the population lives below the international poverty line. UKCI’s commitment will help address a critical shortage of affordable housing in Nairobi and contribute to the country’s goal of building 500,000 new affordable homes by 2022.

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