Business Secretary outlines criteria for Green Investment Bank

In a speech at an industry conference, Cable said that at least 80% of the £3 billion funding committed to the GIB as part of the Government's spending review would be invested in five priority sectors, with the remaining funds invested in other green sectors.

A new team will also be set up within the Department for Business, Innovation and Skills (BIS) to drive investment in the UK's green infrastructure until the GIB is formally established, Cable said. Energy from waste generation and non-domestic energy efficiency would be the bank's other funding priorities.

The Government has announced that from 2012 until State Aid Approval is granted for the GIB, BIS's UK Green Investments project (UKGI) will make direct contributions towards green infrastructure. Once State Aid Approval is granted, anticipated in 2013, the GIB will function as a stand alone financial institution. It is intended that the GIB will have full borrowing powers from 2015, subject to public sector net debt falling.

The setting up of the GIB was announced in 2010 as a means of providing finance to private sector projects related to environmental preservation and improvement. The Government committed to funding the GIB with £3bn over the period to 2015 in this year's budget.

The Commission generally prevents governments granting advantages or incentives to selected businesses to ensure fair competition inside the EU, however so-called 'state aid' may be approved on a case by case basis. In his speech, Cable said that the GIB would have a broad remit both for commercial investments and on state-aided terms where the Government had "developed strong evidence that such aid is necessary".

The Government has said that transition to a green economy will require "unprecedented investment". An estimated £200bn is needed for the energy system alone over the period to 2020, while in order to meet and exceed EU landfill diversion targets waste infrastructure will need a further £2bn of investment in this period.

Proposals setting out the details of the Green Deal, a Government-backed scheme established by the Energy Act 2011 that will enable new energy efficiency measures to be installed at no up-front cost, were announced last month. The scheme will enable property owners and occupiers to fund the costs of insulation, double glazing and other measures to improve the energy efficiency of their buildings through their energy bills.

Until state aid approval for the GIB is granted, UKGI team within BIS will have access to the £100 million funding recently made available by the Government to invest in smaller scale commercial waste infrastructure projects. Cable also published his criteria for deciding where the GIB will be based, with a view to making a decision on the new bank's headquarters by the end of March 2012. The chosen location should be cost effective, able to recruit and retain specialist staff and allow the GIB to work closely with project developers, green technology providers and other investment bodies.

Over 20 towns and cities have expressed an interest in acting as headquarters for the bank including Bristol, Cardiff, Liverpool, Manchester and Paisley.

"There is a great opportunity for British businesses to lead the transition to a green economy and stake a claim on a sector that has massive potential for growth. I'm pleased to see that more than 20 places recognise the impact the Green Investment Bank could make, and are expressing an interest in being its home," Cable said in a statement.

"I want to set up the Bank as soon as possible, so it can start accelerating investments in these key sectors and help British companies take advantage of these opportunities. Setting out the priorities for the Bank and establishing UK Green Investments for April 2012 are a major step forward."

The formal recruitment process for appointments to the GIB's board and senior management team will begin next month. A chair is due to be appointed in spring 2012.