Our Green Investment Principles August 2017

Setting a benchmark for determining, assessing and managing the green impact of all investment transactions is an integral part of our investment process.

Principle 1 Positive contribution to a recognised green purpose

Principle 2 Reduction of global greenhouse gas emissions

Principle 3 Enduring green impact

Principle 4 Clear and firm investment criteria

Principle 5 Robust green impact evaluation

Principle 6 Effective covenants, monitoring and engagement

Principle 7 Transparent reporting

Where we begin Our mission and purpose Our Green Investment Principles The UK is committed to moving We have been established to To fulfil our mission will require a major towards a more sustainable, low- help the UK to achieve these collective effort, and our greatest carbon economy. This is backed by demanding targets. contribution will come from the some ambitious targets which are set effect that we can have on the out in a number of international and Our money on its own will not wider investment community. national commitments such as the be enough. Multi-billion sums of Kyoto Protocol, the EU Renewable investment capital are now required We can act as a catalyst in the Energy Directive, the EU Waste to finance the necessary green investment markets: to “crowd-in” Framework Directive and the Climate infrastructure and projects. other investors’ money by Change Act of 2008, and include: demonstrating how commercial • Reducing greenhouse gas So, our role, as set by the UK returns can be made from financing emissions; Government, is to act as a catalyst greener infrastructure and projects. • Increasing the proportion of to accelerate private sector green energy generated from renewable investment. We will do this by always But we can also be a catalyst in sources; seeking to invest either alongside other another way, by demonstrating • Improving the energy efficiency of market investors or in other ways that that these returns can be achieved at UK homes and businesses; and will encourage them to lend or invest, the same time as following robustly • Reducing biodegradable waste sent so that we can mobilise the huge “green” investment principles to to landfill. amounts of additional capital required secure the long-term green impact • These targets look ahead to an over the next decade and beyond. of our investments. important future for our planet: a sustainable future built on a low-carbon economy and fuelled increasingly by renewable energy. Every project we support, and every Statement of green investment This principle recognises that some investment we make, has to satisfy principles projects will have a greater impact these investment principles. And, by Principle 1: Positive contribution to a than others. Progress to a lower investing alongside us, other banks and recognised green purpose carbon economy will not be direct investors are demonstrating support We will make a loan or investment only or linear, but is likely to involve a for the same principles. if we are satisfied that it will make (or number of incremental steps that, is reasonably likely to make) a positive taken together, will contribute to We are committed to working in an contribution to one or more of our fulfilling our larger mission. open and transparent way, so that recognised green purposes. others – whether they are co-investors Principle 3: Enduring green impact or not – can see the methods and Our green purposes1 are: We will deploy our capital and manage approach that we apply. Our ambition 1. The reduction of greenhouse gas risk based on principles of sound is that, by publishing these investment emissions; finance and responsible investment, so principles, we will help to create 2. The advancement of efficiency in that we preserve and build our capital momentum in a co-ordinated effort to the use of natural resources; base as an institution which can have build a greener global economy and, 3. The protection or enhancement an enduring green impact. over time, to set a benchmark for the of the natural environment; wider investor community. 4. The protection or enhancement We are committed to addressing the of biodiversity; serious challenge of meeting the ever Source and status 5. The promotion of environmental growing demands on the planet’s The Green Investment Principles draw sustainability. natural resources while also building from the aspirations underlying the a strong and sustainable legacy for statutory role given to the UK Green Our Green Investment Policy will set future generations. Investment Bank (“GIB”) by the UK out in detail how we interpret these Government as the UK’s designated “green purposes” and how we assess But we will only be able to do this if “Green Investment Bank”. the contribution that any loan or we remain in operation as an enduring investment may make towards institution, built on the principles They also reflect the fundamental those purposes. of sound finance and responsible objectives set by GIB’s constitutional investment. We will therefore aim documents (as laid down by the Principle 2: Reduction of global to build up a track record of green UK Government), under which we greenhouse gas emissions investments that not only have a are legally required to preserve and We are committed to ensuring that the significant green impact but can also build our capital base as an institution effect of all our loans and investments, offer safe and attractive investment which is intended to have an enduring taken together, is that they will (or returns. This will be the only way to Green Impact. are reasonably likely to) contribute encourage commercial investors to to the reduction of greenhouse gas join us in providing the multi-billion The Green Investment Principles are emissions, both in the UK and globally. sums of capital required to finance the expressed in non-technical terms and necessary infrastructure and projects do not represent a statutory code or We are dedicated to building a – and to promote the transition to a create any rights in, or liability to, portfolio of loans and investments greener economy. any person, public or private. which, taken together, will meet this further objective aimed at reducing Principle 4: Clear and firm Scope global greenhouse gas emissions. investment criteria The Green Investment Principles When assessing any particular loan or We will be clear and firm about the will apply to all loans and other investment we will consider its impact green standards we expect. We will, for investments made by GIB across all the on our ability to meet this wider each industry sector, identify the legal industry sectors in which we are active. objective. We will audit our progress standards and other relevant green every year, by assessing the aggregate attributes that we will always consider In addition, GIB will require that effect of all our loans and investment when assessing whether any particular the Green Investment Principles activities in that year, taken together investment is likely to have a positive are applied by any fund manager with the effect of all such activities in green impact. appointed by GIB to deploy its funds. all our previous financial years.

1 As designated by the UK Parliament and set out in GIB’s constitutional documents.

Our Green Investment Principles 2 Our evaluation criteria for assessing • Prudence: To use realistic Principle 7: Transparent reporting compliance with these standards assumptions and values and We will report at least annually on will be set out in detail in our Green appropriate procedures, whilst being the implementation of our Green Investment Policy. While it may be aware of the risks of optimism bias Investment Principles. satisfactory if a particular project can in the investment process. meet the requirements and standards This will include reporting on (a) the set by law, our preference is to invest in Principle 6: Effective covenants, contribution which we consider our projects that can demonstrate higher monitoring and engagement portfolio of investments is likely to be overall standards of green impact We will seek to impose clearly making to a quantified reduction in performance, a greater likelihood documented requirements for securing greenhouse gas emissions (b) other key of achieving those standards, and the green impacts expected from Green Impact performance indicators the best alignment with our other each of our loans and investments, (such as waste diverted from landfill investment principles. and we will monitor those impacts on and materials consumption avoided) a continuing basis over the life of that as well as (c) a qualitative description Principle 5: Robust green impact loan or investment. of other green impacts. Reported evaluation data will be subject to independent Before investing, we will carefully The nature and extent of monitoring assurance, where appropriate. consider the likely green impact of all will depend on the characteristics prospective investments, based on of the investment (including its We intend to build our reporting a robust and transparent evaluation sector and size), as detailed in the arrangements in close consultation approach and process. relevant industry sector in our Green with stakeholders. We will also report Investment Policy. results transparently, but taking We will seek to apply the following into account client confidentiality principles and approach when Monitoring will be based on regular considerations. evaluating any investment: reports from the recipient of funding in accordance with the requirements • Consistency: To apply consistent imposed within the relevant financing evaluation methods and documentation. Our requirements procedures across all investments. will be primarily designed to enable us to engage with the borrower • Proportionality: To take a and other relevant parties, so that proportionate approach, focusing we can confirm whether the loan on those components of green or investment is delivering its impact that are material to the projected green impact. This will be outcome. supplemented by site visits, or by independent assurance or verification, • Completeness: To assess all together with third-party sources of relevant information, including information as appropriate. the likely green impact of an investment over its lifetime. Where a company has not complied with its covenants, we will work with • Transparency: To require clear that company to bring it back into information to be provided to compliance to the extent feasible. If it us so that a robust evaluation fails to re-establish compliance within can be made. an agreed grace period, we reserve the right to exercise remedies, as we may • Accuracy: To rely, so far as consider appropriate. practicable, on accurate information which avoids bias and reduces uncertainty, but acknowledging that precise measurement is often not possible.

Our Green Investment Principles 3 Headquarters Atria One, Level 7 144 Morrison Street Edinburgh EH3 8EX

Tel: +44 (0)330 123 2167

London office 21-24 Millbank Tower Millbank London SW1P 4QP

Tel: +44 (0)330 123 3021

Find out more Email: [email protected] LinkedIn: Green Investment Bank www.greeninvestmentbank.com

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