Barclays has a keen interest in Renewable Energy and Green Finance and we are working today to engage both our client base as a whole, and the local authority sector, to support the transition to the low carbon economy. Barclays is a great supporter of financing local projects and continues to be the largest UK banking provider to the local authority sector with some form of relationship with 70% of all local authorities. We have 8 Relationship Directors with a local authority sector specialism and these bankers provide day to day transactional banking to 108 local authorities. Barclays’ commitment to the sector is further demonstrated clearly through £4 billion of lending facilities that we extend to local authorities.
In this context we have insight into the challenges we see in the sector through our discussion with our local authority client base. One such example is central government funding with estimates suggesting there could be an overall funding gap of £5bn in local authority finances. At the same time LAs are under significant pressure to increase their investment in housing, with homelessness an increasing problem across the U.K. Add to this significant social and funding challenges and it’s not altogether surprising that there are challenges allocating cash to the development of potential renewable energy projects.
Nonetheless, the need to do so is pressing. We are seeing a response and although individual local authorities may differ, their environmental strategy generally centers around 5 pillars of sustainability – Air Quality; Transport; Waste Management; Energy Efficiency; Planning and Development.
Some of the recent, innovations actions we have seen local authorities putting into place include:
- Barking and Dagenham Council, launched its own greener energy provider on 21st Beam Energy, which is a not-for-profit company and will help residents save money whilst using 100% green electricity from certified UK based solar and wind generators
Why are Barclays interested?
Banks and financing partners have a role to play in mobilising the capital to meet this generational challenge. But the financial incentive alone does not tell the full story of our interest – regulation, reputation and commercial drivers all impact our client base.
When we view the broader issues through this lens having a clear, coherent and comprehensive strategy around sustainability is not optional for successful organisations.
What are the issues Barclays faces in rolling out Green Finance?
One issue facing Barclays is a lack of information. Not knowing where to go in a fragmented market if you want to do something delays and prohibits investment reaching the desired recipients. A second issue is a lack of demand and awareness of Green Finance. There are lots of projects and concepts that are not getting to the stage that they require confirmed financing and a lack of projects to finance leads to fewer projects being funded.
Other issues include:
- We don’t know what we don’t see – we know that lots of projects are out there but don’t get through the development phase so never reach us to request debt financing
- Not a priority for businesses or other investment programmes
- Project development costs and understanding of technology are a key inhibitor.
- Insufficient incentivisation in the banking products – presently there is no capital benefit, no incentive to dilute our returns in a highly competitive and regulated market.
What are Barclays doing?
In order to best ensure that these projects are funded Barclays is taking a number of steps. We are speaking to our clients and providing thought leadership through events e.g. our Green Frontiers Conference. We are changing our own operations and setting science-based targets, while we now also employ sustainability coordinators on new-to-market sustainable or green banking facilities. These actions, amongst many others, are helping to ensure Barclays is able to fund local energy projects as effectively and responsibly as possible.
What does the future hold?
There are several expectations that Barclays currently has for the future. We anticipate successful and well established IPF business – supporting the financing of the renewable energy sector for many years. We also anticipate an exciting period with billions spent in offshore wind in 2018, 2019.
We expect new waste-to-energy plants to open in 2019 and it may also be the year that we see subsidy free schemes in onshore wind and solar that are genuinely commercially viable and replicable.
Energy storage will remain a key topic for the industry as will unsubsidised solar and of course we await the emergence of new and disruptive technologies as we see the mass roll out of EVs and associated infrastructure in the coming years.
Therefore, we feel that there is a lot for us to do. And we are developing the tools to help us meet these needs.