The UAE state funded energy group Masdar has signed a deal with the UK’s Green Investment Bank (GIB) that will see the two invest together in low carbon projects.
The news is a boost to the GIB which has been limited in its capacity to extend its resources by the government.
The Bank, which is the only of its kind in the world, was set up by the government and allocated £3bn in initial funding. It works on the basis of a “double bottom line”, with financial and environmental achievements assessed.
It will not be allowed to function like a normal bank and borrow money from the regular markets until the UK economy improves.
Masdar, which includes a sustainable city, research institute, project development and investment arm, has already sunk £500m directly into the London Array offshore wind farm.
The Financial Times reported that the value of the deal is in the region of £1bn.
UK climate change Minister Greg Barker said the agreement is about more than the investment.
“We always intended this brand-new financial institution to act as a catalyst to attract other finance into the UK low carbon economy.
“This alliance is a big step in that direction, and a huge vote of confidence in the UK clean energy sector. But this agreement is about more than just money. Given the achievements of Masdar, it makes strong strategic sense too.”
Investment on that scale will enable the GIB to extend its reach until it is allowed to borrow from more traditional sources. The Treasury has said the national debt must be reduced by 1% of GDP first.
The Bank was approved by the European Commission in October 2012 but received a setback when it’s chairman Sir Adrian Montague resigned. He is yet to be replaced.