Green Investment Bank Annual Report 2013
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Annual Report 2013 Contents DIRECTORS’ REPORT 3 Chair’s Report.......................................................................................................................................3 Chief Executive’s Overview ..................................................................................................................4 GIB Highlights 2012–13 ......................................................................................................................6 1. Who We Are and What We Do ......................................................................... 8 Case Studies ..................................................................................................................................... 10 How the Team Works ........................................................................................................................ 14 Board of Directors ............................................................................................................................. 16 Executive Team.................................................................................................................................. 18 2. Our Double Bottom Line ..................................................................................... 20 Green Performance .......................................................................................................................... 22 Investment and Financial Performance .......................................................................................... 26 3. Corporate Governance ........................................................................................ 32 How the Board Works ....................................................................................................................... 34 Transparency Statement .................................................................................................................. 36 Green Committee Report .................................................................................................................. 38 Remuneration Committee Report .................................................................................................... 40 Audit and Risk Committee Report .................................................................................................... 46 Risk Management and Internal Control .......................................................................................... 48 Directors’ Statement of Responsibilities ..........................................................................................51 GREEN IMPACT STATEMENTS 52 Green Purpose 1: The Reduction of Greenhouse Gas Emissions ................................................. 53 Green Purpose 2: The Advancement of Efficiency in the Use of Natural Resource ..................... 54 Green Purpose 3: The Protection of the Natural Environment ...................................................... 55 Notes to the Green Impact Statements ........................................................................................... 56 Independent Assurance Report ........................................................................................................57 FINANCIAL STATEMENTS 58 Independent Auditor’s Report .......................................................................................................... 59 Consolidated Income Statement ..................................................................................................... 60 Consolidated Statement of Comprehensive Income .......................................................................61 Consolidated Statement of Financial Position ................................................................................ 62 Company Statement of Financial Position ...................................................................................... 63 Consolidated Statement of Cash Flow ............................................................................................. 64 Consolidated Statement of Changes in Equity ................................................................................ 65 Notes to the Financial Statements .................................................................................................. 66 2 Chair’s Report Building a new organisation from scratch represents a significant challenge, especially when it will become a key component of the …GIB is being UK’s low carbon economy. The best talent available needs to be recruited, premises found, policies established and, in our case, used as a model important investment decisions need to be made. for similar projects throughout the Furthermore, we will spend a good deal of time We are building an enduring bank that is here world. listening to our stakeholders in Government, for the long-term. We have appointed all of our industry and Non-Governmental Organisations top team and found a permanent home for our (NGOs) to ensure we best reflect the desires of Edinburgh HQ. In the space of a few months those whose courage and determination saw this we have gone from being a great idea to a real bank come to life in late 2012. bank, with real people making real and important investments. It is, therefore, a matter of great pride for me, as Chair, to reflect on the UK Green Investment Bank This start-up phase brings with it an unusually plc’s (GIB) first operational period, the progress we intense range of corporate governance demands are making and to present our first Annual Report. and the Board’s full report on these matters is on p. 32 to p. 51. I would like to thank all the Being transparent is important to us and in this members of the Board for their support and report and all of our communications, we intend commitment. I would like to pay particular tribute to provide as much detail as we can without to Sir Adrian Montague who stood down during prejudicing our commercial position and that the year after playing an integral role in bringing of the companies and projects in which we may GIB to life. invest. In this report we explain our purpose and our commitment to stakeholders. We also set out This is only the beginning. There is an important the investment decisions we have made and how future ahead; a future built on a low carbon those investments are performing. economy and fuelled largely by renewable energy. It is a future that we at GIB are committed to We are investing significant capital in a range of creating as quickly as we can. exciting renewable energy projects, helping to lay the strong foundations of a low carbon economy. Our Executive Team, led by Chief Executive Shaun Kingsbury, is making a real mark and GIB is being used as a model for similar projects throughout the world. Lord Smith of Kelvin Chair Annual Report 2013: Directors’ Report 3 Chief Executive’s Overview We are now five months into the job of building a new bank. It is a bank driven by a very clear and unique mission – to accelerate …Taken the UK’s transition towards a greener economy. A bank that will be an enduring institution, operating independently of Government. together, [the I want to take the opportunity, in our first Annual Report, to report renewable energy on our progress so far. output of our projects] in 2020 Building a more sustainable, green economy We have purposely set out to build these measures in partnership with our stakeholders would roughly We came into existence driven by a very clear and we’ll report our results transparently. policy intention. We were set up to help the UK These principles of being an open and engaged meet the electricity achieve its demanding targets for the reduction of institution will characterise how we work. greenhouse gas (GHG) emissions, to increase the needs of around proportion of energy generated from renewable 2. Our financial returns. We are a for-profit bank. sources, to improve the energy efficiency of UK We can only be a catalyst if we can demonstrate 2.5m homes... businesses and homes and to reduce waste sent that our investments generate returns attractive to landfill. These targets cannot be achieved by to the private sector. Success in making profits a continuation of the status quo. They require through our investments will aid the process a multi-billion pound direct investment in the of capital formation around the clean energy country’s low carbon generating assets over the business more widely. next ten years. So far, we’re seeing investment at only half of the required rate. With these measures as the cornerstones of our investment strategy we’ve made a solid start. Our role is to be a catalyst; to bring in more private In five months of activity we’ve committed funds sector financing. We’re using our initial capital of to 11 transactions. These transactions – once £3bn to invest in sustainable projects which need the projects are fully operational – are expected our finance, knowledge and reputation to succeed. to reduce UK GHG emissions by an average of Every pound we invest must be additional, which over 2.5 Mt CO2e per year over their life and to means that we’ll only invest when a project is short generate 11.8 TWh of renewable electricity in of capital. Our job is to crowd-in private sector 2020, which is around 9.5% of the UK’s projected investment, not crowd it out. We are working with renewable electricity in that year. Taken together, other private sector finance providers to form their output in 2020 would roughly meet the strong investment