Hopes that the £3 billion Green Investment Bank will encourage development of early stage renewable technologies have been dashed by the man picked to oversee it.

Sir Adrian Montague warned green companies not to expect handouts. The City grandee heading the much-vaunted bank told The Times that it would act like a commercial lender and would not risk taxpayers’ cash investing in areas that the private sector refused to back.

His comments signal a victory over the Department of Energy and Climate Change by the Treasury. Chris Huhne, until recently the Energy Secretary and one of the bank’s most ardent supporters, had been pushing for it to be allowed to make riskier investments. This would have enabled the bank to back a wider range of projects, such as experimental solar schemes, that are a long way from being profitable.

“We are not trying to give soft loans and grants,” Sir Adrian said. “We are not looking to give grants and support in areas where the private sector would not give support. We are looking at the technologies which need the leg-up to be commercial.”

He said the institution would operate like a conventional development bank, such as the European Bank for Reconstruction and Development, and would have to make a profit. It will have to make a minimum rate of return on its investments, from which the Treasury will take a dividend...

Campaigners warned that the bank would have a limited impact if it behaved no differently from commercial lenders. Tom Burke, director of the climate change advisor E3G, said: “The whole purpose of having the bank is that it would help take on risk that commercial banks and lenders are not prepared to take. If the GIB acts no differently to commercial lenders, then its £3 billion of funding by 2015 would have a fairly marginal impact.”

Full story (subscription required)