Why the Green Investment Bank should be located in Edinburgh

31 Mar 11 - Martin McAdam, CEO

Edinburgh is a powerhouse of the financial industry. It is not just major banks that have located here, there are a plethora of smaller and mid-sized financial organisations that support Edinburgh as a strategic financial destination. While banking experience is important, the experience located in the support industries such as investment management, corporate finance, insurance, strategic tax planning and also in the legal profession that also help structure and "paper" the deals is what makes a great financial centre.

Edinburgh is the second largest financial centre in the UK after London and is the fourth largest in Europe. Despite the financial turmoil and the back-lash against bankers, the international financial services industry based in Scotland has a long-held reputation for innovation and excellence.

The clue is in the name

The clue for the role of the Green Investment Bank (GIB) is in the name "Green". That role should cover everything from energy efficiency to technology development. But what areas should the bank look to finance? Well the GIB must focus on areas where there is market failure - otherwise it will compete with the commercial banks and we certainly don't need the GIB to do a job that the commercial banks are already prepared to do.

The marine industry is a perfect example of the role for the GIB. The first arrays of devices will require project equity, capital grant support and debt. The technologies will be regarded as higher risk until they are deployed in volume. The GIB has a role in ensuring these projects get financed and nursed through the early stages of commercial deployment. Projects up and running with proven cash flows can then refinance and bring in the commercial banks when the risk profile of the projects matches the commercial bank appetite.

Putting together financial products that match the profile of the marine energy industry will be a challenge. It will require quality strategic thinking and innovation - maximising the opportunity for Scotland's renewable industry while mitigating the risks from early stage technologies. Edinburgh is up to this challenge. Scotland has the bulk of the marine energy resource in the UK and locating the GIB in Edinburgh makes sense from an opportunity and industry perspective.


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