The Green Investment Bank - Environmental Audit Committee Contents

Supplementary written evidence submitted by Ben Warren Ernst & Young LLP

Further to your letter dated 2 December 2010, I have pleasure in setting out below my response to your specific queries:

1.  How should government/Green Investment Bank combine the very different skills of finance and green technologies into a single organisation?

These skills are not necessarily mutually exclusive. There are a large number of finance professionals working in the green and low carbon sector in the UK, whether financial investors, utility and other trade players, or advisory professionals. Ernst & Young employs some 70 people working full time in the low carbon sector itself, all of these people being from an accounting, banking, finance or engineering background.

Depending on the role and functions of the GIB, there are likely to be some specific skills and expertise required in the organisation, such as capital markets experience, the ability to assess the credit and investment qualities of certain deals, projects, or investment opportunities. This expertise does reside in the market place, both in a general sense, but also with specific sector expertise.

The GIB's ability to attract talent will, I suspect, be largely influenced by the remuneration packages it proposes to offer, including the provision of market rate bonuses. However, it might be able to secure some talent on the basis of good will. In considering the resourcing and staffing needs of the GIB, the ability to outsource work and expertise should be considered to avoid building an unduly large overhead for the institution.

2.  What (if any) bridging role would you like to see GIB adopting?

The remit of the GIB should be clear, whether it is there to invest or co-invest alongside commercial funders, or in providing certain risk products to stimulate private sector investment, or in providing a conduit for new capital providers to enter the sector - ie helping address the liquidity market failure. In performing these activities the GIB is likely to get good visibility over some of the barriers and constraints faced by private sector capital providers. As such, the knowledge collected by the GIB would certainly be of value to government and policy setters. However, this should in no way act as a substitute for Government engagement with the market itself, in particular the financial market.

3.  Financial accounting implications

Unfortunately, we are not able to provide advice on the relevant public accounting issues that might be faced regards the products and activities the GIB might provide without a sufficiently detailed review of this subject, which is inherently complex and at the moment open-ended regards the possible structure and roles of the institution itself.

I am sorry I cannot be more helpful in relation to point 3 above, however this subject matter requires suitably detailed consideration to ensure robust advice and guidance is given.

21 December 2010

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