Location of the Green Investment Bank
Self-Assessment for Edinburgh
Submitted by the Edinburgh Green Investment Bank Group
Please click the following link for the pdf version which is available for download - Edinburgh Self Assessment, Green Investment Bank
Contents Page
Executive Summary
1. Introduction
2. Edinburgh's ability to recruit and retain key staff
2.1 Financial services
2.2 Quality of life
2.3 Edinburgh's business environment
3. The quality of Edinburgh's transaction eco-system
3.1 Proximity to market participants
3.2 Skills providers and research
3.3 Thought leadership
4. Cost effectiveness considerations
4.1 Office costs
4.2 Transaction costs
5. Basic Factors
5.1 Transport links
5.2 Information and communications technology
5.3 Office availability
5.4 Economic impact
Executive summary
Based in Edinburgh, the Green Investment Bank (GIB) will be an enduring financial institution with visibility and a distinct identity which mobilises significant additional finance into green infrastructure projects. It will deliver the Government's objectives of accelerating the transition to a low carbon economy and provide a return on capital employed into the Bank.
Edinburgh is the ideal location to deliver the GIB's mission for the following reasons;
The ability to recruit and retain key staff
- The GIB will be able to recruit from a cluster of top quality financial services companies with 60,000 currently employed in the sector across Edinburgh's travel-to-work area
- Edinburgh already has an experienced pool of world class professionals in finance, fund management, legal services, engineering, green infrastructure and university campuses, all playing vital roles in the areas in which the GIB will be active. It also has deep levels of expertise across the specific functions required to deliver the Bank's mission
- Where it is necessary to recruit for posts internationally, Edinburgh is recognised as having a world-class quality of life with a global profile which has been proven to attract and retain the best in professional talent
The quality of the transaction ecosystem
- Edinburgh has proximity to levels of green infrastructure development not found elsewhere in the UK. As part of the UK's leading region involved in green infrastructure, with a disproportionate share of renewables investment, locating the GIB in Edinburgh will ensure the best possible chance for the UK to develop as the European centre of excellence in this sector
- Edinburgh is already home to the headquarters of global firms in financial services and green technology and offers the perfect nurturing environment for the growth of the GIB
- The GIB will be supported by world class research and specialist skills in low carbon technologies coming from Edinburgh's strong and internationally connected academic and company base
- Significant UK infrastructure activity is already transacted from Edinburgh and domestic and foreign companies involved in green infrastructure have a long and well-diversified presence
Cost effectiveness
- Property and transaction costs in Edinburgh are highly competitive with other cities
Other considerations
- Edinburgh is one of the UK's best connected cities, with strong domestic and international transport links and world class ICT links
- The City of Edinburgh Council is committed to guaranteeing the GIB its first three years' accommodation in Edinburgh on a rent-free basis
- Given the quality of Edinburgh's transaction ecosystem, the GIB will have a greater economic impact at a UK level, than if the Bank were sited in other locations. This in turn will help the UK Government to deliver its low carbon objectives
1. Introduction
Edinburgh is the perfect location for the Green Investment Bank.
Not only is it an internationally renowned financial services centre but it is also part of the UK's leading region for green infrastructure and investment with specific skills in the priority sectors identified by the Department for Business, Innovation and Skills (BIS).
These factors, combined with Edinburgh's brand reputation as an ideal place to live, work and invest puts the city in a unique position to deliver the UK Government's aim of successfully transitioning to a green economy.
There is considerable private and public sector support for the bank being located in Edinburgh. During the consultation process for this assessment, the Edinburgh Green Investment Bank Group has engaged with a wide range of stakeholders and partners who will be affected by its operations.
The result is a document which has support from a large cross-section of major financial services and renewable energy companies, all political parties in Scotland and from all Scottish cities.
Our self assessment is structured in accordance with the criteria set out by BIS. In doing so, it sets out how Edinburgh will deliver the GIB's overall mission and its suitability to deliver the GIB's investment and strategic functions. It also sets out how Edinburgh will satisfy the basic connectivity and location requirements of the GIB as an organisation.
Specifically, it responds to the following:
- The ability to recruit and retain staff with the necessary specialist expertise and experience over the long term
- The quality of the transaction "ecosystem" in the local area
- Cost effectiveness considerations
- Basic requirements of location
To illustrate the strengths and capabilities of Edinburgh, we have included relevant examples of companies and/or projects that demonstrate the skills and expertise that will be available to the Green Investment Bank. These are just a selection of what is currently being delivered in and around Edinburgh.
2 Edinburgh's ability to recruit and retain key staff
"The Green Investment Bank's location must meet the need, over the long term, to recruit and retain high quality staff with specialist skill sets to carry out its various functions."
This section demonstrates how Edinburgh provides:
- Ease of access to deep talent pools across financial and business services and clean energy industries, ensuring exceptional opportunities for the GIB to recruit and retain staff with the specific skills required to deliver the Bank's functions; and
- Exceptional quality of life and other attractions necessary to attract cross-UK and global talent to the GIB should this be required.
Edinburgh is home to the headquarters of more FTSE 100 companies than any other UK city outside London. Some of the UK's biggest private and public sector organisations and over 14 700 small and medium sized businesses are also based here.
Financial and business services remain at the heart of the city's economy. The size and scale of this globally acclaimed community, combined with Edinburgh's expertise in clean energy industries, will ensure the GIB has access to all the talent it requires.
Where it is necessary to carry out global recruitment for senior GIB officials, the quality of life on offer in Edinburgh will act as a powerful tool in encouraging talented individuals to relocate from other parts of the UK or overseas.
2.1 Financial Services
The self-assessment criteria make clear that the GIB must be able to recruit from a location with a strong financial services community. Edinburgh can demonstrate a deep pool of talent in the specific skills required to deliver key GIB functions, as well as a proven track record in establishing new operations in the city quickly and effectively.
Edinburgh has a strong heritage and international reputation in financial services. It is the UK's most complete financial services centre outside London, with world-class capabilities in banking; investment management and asset servicing; insurance and pensions. There are strong links between the banking communities in Edinburgh and London and global markets, with employees in different locations working alongside each other on a wide range of projects and corporate deals.
This means there is a wealth of financial services talent in Edinburgh with 36,000 people in the city currently employed in the sector. This labour market is one of the best in the UK, partly due to the city's internationally renowned universities, which produce high calibre graduates to work in the sector every year as well as experienced professionals, many of whom have worked in a number of institutions and a variety of international locations.
The talent pool has been further enhanced by the presence of significant indigenous and international companies operating across the central belt of Scotland. These include Barclays, HSBC, National Australia Group, RBS, Lloyds Banking Group, Deloitte, PWC, Ernst & Young, KPMG, Grant Thornton, Standard Life Investments and Scottish Widows Investment Partnership, amongst others.
While Edinburgh is undoubtedly at the heart of Scotland's financial services industry, there are complementary skills to be found across central Scotland, particularly in Glasgow, where 25,000 are employed in the sector.
Edinburgh's proposition, however, extends far beyond financial services. There is also depth in many of the professional services skills that will be critical to the GIB's success:
| Table 1 - Employment in relevant sectors (2010) | |||
| Sector | Edinburgh | Edinburgh City Region | Scotland |
| Banking and other finance/credit granting | 15,800 | 22,000 | 45,200 |
| Fund management | 3,300 | 3,300 | 3,500 |
| Securities and brokerage | 1,700 | 1,800 | 3,300 |
| Legal activities | 7,300 | 10,300 | 27,900 |
| Accounting/bookkeeping/auditing/tax consultancy | 3,600 | 5,500 | 19,500 |
| Management consultancy | 3,600 | 6,300 | 16,600 |
| Engineering activities/technical consultancy | 4,400 | 8,100 | 43,600 |
| Environmental consulting | 100 | 200 | 500 |
| Source: Office for National Statistics, Business Register and Employment Survey |
Despite the scale and size of the financial services sector in Edinburgh, it remains relatively compact in nature due to the close working relationships that exist both within the sector and with professional services firms operating in the city. This well connected network ensures that new entrants to the economy are able to build necessary relationships across the private and public sectors, ensuring their operations are effective as quickly as possible.
Edinburgh's outward looking perspective has added to the sector's ability to develop innovative financial solutions by breaking down silos, focusing on outcomes and bringing different components together quickly and efficiently. It has also allowed Edinburgh to achieve considerable success in mobilising and managing significant levels of funding from global markets in a way that is flexible, nimble and innovative - all of which will be vital to the long term success of the GIB .
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Within financial services, BIS has identified four main categories of skills which the Green Investment Bank will need to access:
- Project finance
- Structured finance
- Advisory
- Investment management
These skills will help the Green Investment Bank to develop the financial structures it requires to invest in low carbon projects and identify, assess, execute and manage project investments.
Edinburgh's financial and professional services firms have a particularly strong reputation in these areas. The emergence of low carbon industries in close proximity to Edinburgh has meant that many of these companies are already applying these skills to low carbon and renewable projects.
Further detail on specific expertise available within Edinburgh is outlined below.
Project finance
Over the last 20 years, Edinburgh has established itself as a major UK centre of project finance activity.
Edinburgh has led the development of the UK's approach to project finance alongside London and this has generated a significant local base of banking and advisory skills which currently support projects throughout the UK and Europe.
Project finance has evolved considerably as a financing tool over the last two decades, aided significantly by the growth of Private Finance Initiatives (PFI) and Public Private Partnership (PPP) in the UK, upon which much of Edinburgh's professional and financial services sectors have built their growth.
Edinburgh's expertise is due primarily to the development of distinctive and substantial programmes of privately financed infrastructure projects in Scotland. Banks have also maintained project finance teams which have serviced the UK and European markets from an Edinburgh base.
The development of the project finance industry in Scotland has also enabled professional services firms such as accountants, lawyers and technical consultants to develop strong practices, using Scotland as a base to expand into other parts of the UK and further afield. More recently, the growth of the low carbon energy industry has provided a natural growth market with skills developed in the Public Private Partnership sector easily transferable into this new market. The project finance capability in Scotland, combined with its long-standing expertise in the oil and gas markets are critical factors in facilitating the process of main-streaming the low carbon energy sector for investors.
At the same time, project finance know-how has spread across a diverse range of organisations as the number of active UK banking project finance teams has diminished since the financial crisis of 2008. Project finance capability remains embedded in Edinburgh's financial and professional services networks and in the major corporates such as Scottish Power and SSE, who support the emerging low carbon sector throughout the UK.
Companies and other institutions in Scotland with strong expertise in project finance include:
- All major banks with a base in Scotland have project finance capability in green infrastructure. The most notable examples would include RBS, Barclays and Lloyds Banking Group, who have expertise in structured finance, energy, infrastructure and project finance.
- In Edinburgh, there is a significant number of financial advisers with project finance experience in green infrastructure including; Espirito Santo Investment Bank (incorporating Execution Noble), Quayle Munro, Noble Grossart, Canaccord Genuity and Triodos Bank, the latter having financed more than 300 renewable energy projects across Europe.
- Deloitte, Ernst and Young, KPMG, PWC and Grant Thornton all have presence in Edinburgh and are a significant source of project finance skills.
- The Scottish Government has also recently established the Infrastructure Investment Board and Scottish Futures Trust which manages Scotland's capital investment programme and has recruited over 30 project finance professionals in the past two years.
- Three of the eight-strong International Project Finance Association UK Council are based in Edinburgh
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Structured finance
Structured finance is becoming an increasingly critical component of green infrastructure project financing. GIB staff will need skills to identify and assess structured finance products and to appraise the underlying credit profile of the projects to be financed. The GIB will also need a strong base to access global teams in other organisations who can develop these products as and when needed.
Edinburgh has developed strong capabilities within this area through the management of major debt and bond funds including:
- £2.6 billion Scottish Widows Corporate Bond Fund
- £375.2 million Standard Life Investments Corporate Debt Fund
- £132.9 million Baillie Gifford Corporate Bond Fund
- £85.8 million Standard Life Investments Strategic Bond Fund
Edinburgh institutions were also important participants in the enhanced project bond market which supported PFI financing prior to the withdrawal of the monoline insurers. These institutions have remained important participants in the current utility bond market and have excellent access to staff with specific skills in understanding project credit enhancement.
Edinburgh has also been home to major innovations in structured finance. For example:
- Restructuring of the HBoS project portfolio and subsequent investment by pension funds which has paved the way for many similar developments
- Development of the non-profit distributing private finance model into a standardised structure now widely accepted by UK and European sponsors and investors
- The use of guarantee structures to create a low-cost financing structure for new housing in the National Housing Trust
- The first monoline bond financed PFI hospital, Law Hospital, was structured from Edinburgh
These projects demonstrate that Edinburgh has the talent needed to perform such complex and challenging structured financial initiatives, which will be vital to the success of the GIB.
The structuring skills that have been applied to the existing offshore and onshore wind markets for Scottish developers including the role of Power Purchasing Agreement (PPA) structuring in project development and the relevant tax, legal and accounting support will also be readily available to an Edinburgh-based GIB.
Advisory
Edinburgh has a highly advanced network of specialist advisers who are familiar with complex and large scale transactions, particularly within the green infrastructure sectors mentioned by BIS.
This includes an experienced financial services advisory community with large professional services firms such as Deloitte, Ernst and Young, KPMG, PWC and Grant Thornton all maintaining offices in Edinburgh. Many large second tier firms also have significant local expertise that covers corporate finance, project and infrastructure finance.
- All of the key legal firms in Scotland have banking, project finance, and renewables teams in Edinburgh. McGrigors and Brodies have particular strengths in this area while Anderson Strathern, CMS Cameron McKenna, Dundas & Wilson, Dickson Minto, HBJ, Maclay Murray and Spens, and Shepherd & Wedderburn all have offices in Edinburgh and have strong, relevant and experienced advisory capability.
- English firms such as DLA Piper, Pinsent Masons and Eversheds have also established project finance teams in Edinburgh.
- The top five accountancy firms in the UK have substantial offices in Edinburgh with established centres of excellence in green infrastructure
Many of Edinburgh's professional services firms are reporting major expansion in their renewable energy teams over the past three years and forecasting similar growth for the future.
Investment management
GIB staff will require a deep understanding of green industry sectors and how the risks and rewards can be structured to reflect the long term nature of the assets. One of Edinburgh's biggest strengths is its investment management capabilities. There is expertise at the high-risk early-stage end of the green infrastructure sector, as well as in institutional investment, which is widely seen as a long-term solution for the growth of low carbon industries.
- Edinburgh is ranked the fourth largest financial centre in Europe in equity assets. It is a strong, diverse and vibrant community capable of attracting and retaining top international talent into world-class organisations based in the city
- Around 13% (£750 billion) of total UK assets under management are managed in Scotland, primarily in Edinburgh. The investment arms of major institutions such as Scottish Widows and AEGON are based in the city.
- Edinburgh is also home to independent fund managers such as Baillie Gifford, Standard Life, F&C and Artemis and pension funds such as the £3.2 billion Lothian Pension Fund
- Ten of the UK's 100 largest pension schemes by assets are managed in Scotland with a value of £76.6 billion, including the £37.7 billion NHS & Scottish Teachers Superannuation Scheme - the UK's largest pension scheme
- Six of the top 10 global asset servicing companies have substantial operations in Scotland. These include BlackRock, State Street and the European Asset Pricing Hub of JP Morgan.
Private equity is also a vital ingredient in the overall investment mix for the low carbon sector. It allows risk to be taken at earlier stages of development of projects and technologies.
Scotland has a thriving private equity industry, as well as one of Europe's best developed business angel networks, providing smaller-scale risk capital to ambitious companies with real growth potential. Some of the key players in Edinburgh are:
- SEP is a well established Scottish private equity house which has recently launched an Environmental Energies Fund with initial funding of £95 million raised from investors across Europe. It has also acquired a portfolio of cleantech investments from SSE.
- Sigma Capital manages two sustainable energy funds from its Edinburgh base
- Dunedin is a leading UK mid-market private equity provider based in Edinburgh & London. It invests in businesses with an enterprise value of £20 - £75 million and buyouts requiring equity of up to £50 million.
- Murray Capital invests in a wide range of industry sectors, from manufacturing and technology to support services and leisure. The firm takes a strong partnership approach to its investments, and differentiates itself from traditional investors by a flexible and longer term view to returns and exits.
The Edinburgh area also has organisations with specific skills in operational portfolio management of infrastructure and energy investments. These include:
- Infrastructure Managers Limited which provides management services to Barclays' infrastructure fund portfolios and other infrastructure investors, covering a portfolio of more than 75 projects
- Execution Noble (Banco Espirito Santo) and Quayle Munro have delivered management services for infrastructure assets in the recent past.
Other professional experts
The Green Investment Bank, as a small headquarters operation, will also require staff in areas including human resources, facilities management, information technology and communications. Given Edinburgh is a location of choice for many Global and European headquarters, including several FTSE 100 companies and has a track record of meeting the employment needs of major multinational companies, recruitment in these areas will be straightforward.
Green economy experts
The GIB will require green economy expertise to deliver its analytical and appraisal functions.
Alongside the capabilities of its financial and professional services community, the Edinburgh city region is also home to major companies that are responsible for some of the UK's most exciting and ambitious renewable energy and green infrastructure projects as well as leading academics.
This clustering of many of these companies alongside academia and R&D in close proximity to Edinburgh means that there is a large pool of green economy expertise available to support the development and delivery of Green Investment Bank interventions, both in the current priority sectors identified by BIS and those in the future. This large body of locally available expertise will help the GIB to execute its key functions, from market analysis and policy development, to project appraisal and closing deals.
For example, the two largest holders of Crown Estate leases for offshore wind development - SSE and Scottish Power Renewables - both have their global headquarters in central Scotland, where their commercial, analytical and finance teams are also based.
While offshore development activity is happening across the UK, the strongest concentration of skills, including R&D, through supply chain and from potential turbine manufacturing to installation, is situated close to Edinburgh. This focus will increase as development in the northern leases gathers momentum.
Similarly, since the launch of the Scottish Government's Zero Waste policy, there has been a substantial acceleration in the waste management market within Scotland and currently four major projects are in procurement, with a further five to seven likely to come to procurement over the next two years.
Through a series of major wastewater projects in the late 1990's, Scottish-based lenders and advisers developed project skills which were subsequently focused on the English and Northern Irish waste markets. The recent growth in the Scottish waste project market has re-established these skills and ensures there is a strong base of project financing and technical skills on which the GIB can draw.
Further information on the exceptional green economy expertise that would be available to the GIB located in Edinburgh can be found in section 3 of this document.
2.2 Quality of life
Regardless of where the Green Investment Bank is located, the search for senior management positions in particular is likely to be national or even international in nature.
Quality of life aspects will, therefore, play a significant part in the decision making process of individuals who will want to relocate to a city that can offer a high quality mix of social, leisure and cultural activities.
"Edinburgh is a well established financial services market which attracts highly skilled professionals from across Scotland, the UK and globally. The attractiveness of location combined with the variety of opportunities to develop careers, and with the emerging developments of the green sector in Scotland, all contribute to Edinburgh as a career destination." Karen Scott, MD Hudson Scotland & Ireland
Edinburgh is consistently named as having the best quality of life of any major city in the UK because of its culture, its institutions and its history. Edinburgh also offers a wide range of housing options and internationally renowned schooling to ensure there is minimal disruption to individuals and their families.
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2.3 Edinburgh's business environment
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Despite the global economic slowdown in recent years and the fiercely competitive marketplace for foreign direct investment, Edinburgh has shown its ability to attract top global companies. Foreign direct investment into Edinburgh in 2011 was up 72% on 2010, and more than doubled since 2008.
This has included financial services firms such as BlackRock, BNY Mellon, State Street, Tesco Bank HQ and Virgin Money HQ as well as other leading blue chip multinationals such as Mitsubishi, Toshiba, Amazon and Avaloq.
These companies frequently refer to the quality of the city's labour market, the strength of its academic and research capabilities and its supportive business environment as being the main reasons for investment.
Other key points include:
- Edinburgh was ranked the seventh top city in the world in terms of ease of doing business in the Worldwide Centres of Commerce Index produced by MasterCard in 2008. The index was based on factors including the ease of employing workers and the availability of banking services.
- The most recent Cities Outlook from the Centre for Cities highlights Edinburgh as one of the UK's most successful cities. It also found that Edinburgh has 47.4% of the working age population holding a degree level of professional qualification. This is the third highest proportion in the UK behind Cambridge and Oxford.
- Edinburgh was ranked the UK's most competitive large city in the 2010 UK Competitiveness Index compiled by the Centre for International Competitiveness
Like any other investor to the city, the Green Investment Bank staff will benefit from dedicated public sector and broad private sector support to provide practical advice and contacts to the GIB team. This support which is brought together for all new investors in the city is put in place as soon as the decision to locate in Edinburgh is confirmed and remains in place until the operation is fully operational.
This joined-up local / national approach ensures that new investors can exploit their full potential and access the right support to help them establish and grow their operations in the city.
3. The quality of Edinburgh's transaction eco-system
"The Green Investment Bank will need to access high quality legal, technical and transaction advice as well as professional services and to interact effectively with other relevant market participants, particularly investors, project and infrastructure developers and green technology providers. It will also be important for GIB staff to have access to other parties involved in developing thinking on the green economy (including NGO's) as well as those generating research and formulating investment policy at other institutions investing in green infrastructure."
The Edinburgh city region is home to a number of major green infrastructure projects and, as a result, is already seeing a significant level of clustering of low carbon expertise.
Edinburgh's eco-system is illustrated below. The broad range of companies, trade associations, thought leaders and customers highlighted all have strong local, UK and international connectivity. It is the potential for these bodies to use the eco-system to engage with customers & investors and to further develop new ideas & connections that provides Edinburgh with such a compelling case as home to the GIB.
This eco-system will ensure effective collaboration between industry and finance that will help to develop, manage and de-risk investments. In turn, this will enable GIB teams to make investments quicker, therefore accelerating the commercialisation of low carbon technologies and ensuring the UK remains at the forefront of global developments within the industry.
3.1 Proximity to market participants
Scotland is an international centre of excellence in energy technology and deployment. In the renewables sector, with its natural resources, technological prowess and strong policy support, Scotland is set to play a pivotal role in achieving the UK wide target of generating 20% of energy consumed from renewable sources by 2020.
Around half of the total UK renewable energy capacity is in Scotland and significant investment over the past few years has seen a sizeable industry emerge. Scottish Renewables highlighted that almost £750 million of renewable projects started last year and there is a £46 billion pipeline of Scottish projects, which have the potential to generate 17GW of electricity. Of the 346 UK onshore wind farm projects which have reached "financial close", 142 of them are in Scotland.
Two of the UK's biggest utility companies, SSE and Scottish Power have their headquarters in central Scotland within easy travel distance of Edinburgh and have in-house teams with senior expertise in corporate and project finance and projects focusing on infrastructure and renewables.
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Edinburgh also has close proximity to waste companies, large industrial end users and project developers. The table below highlights the "critical mass" of activity within the Edinburgh area that can be harnessed. This is demonstrated not just in the scale of the industry itself, but in the support services that have built up around it and the specialist educational and research capabilities that have developed to support it.
| Existing renewable energy capacity | Scotland | UK |
| Installed capacity of sites generating electricity from renewable sources, MWe | 4,365.1 | 9202.2 |
| Generation of electricity from renewable sources, GWh | 9,515.3 | 25,733.3 |
| Installed heat capacity of combined heat and power schemes, MWth | 2,772 | 10,524 |
| Generation of heat from combined heat and power schemes, GWh | 6,700 | 47,815 |
Department of Energy and Climate Change (September 2011) Energy Trends
Offshore Wind
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Scotland is growing as a major European and global centre for offshore wind development. Developers that have chosen to locate close to Edinburgh are playing a dominant role in the UK offshore wind programme. These companies are also developing new project opportunities beyond UK waters - including Germany, France and Spain. As a consequence, central Scotland is recognised internationally as a major centre for the offshore wind industry.
This reputation has attracted new offshore wind development companies to Scotland including Mainstream Renewable Power and Repsol. It has also significantly increased Scotland's attractiveness to other supply chain companies, from turbine manufacturers to boat handlers. The sector has very effectively combined with higher and further education institutions to drive innovation and further value add.
Locating the Green Investment Bank into this environment has the greatest potential to unlock further opportunities for the UK's low carbon economy.
Key developments within the UK offshore wind sector that are sited in Scotland include:
- SSE has developed an alliance with Siemens, Siemens Transmission and Distribution, Subsea 7, Burntisland Fabricators and Atkins to collaborate on its offshore wind programme. It will be based in SSE's new Centre of Engineering Excellence for Renewable Energy (CEERE) in Glasgow. SSE is also establishing an offshore wind turbine testing facility at Clydeport's Hunterston site.
- Mitsubishi Power Systems Europe has announced plans to invest up to £100m in a new Centre for Advanced Technology in Edinburgh for research and development into offshore wind turbine technology. It has also acquired University of Edinburgh spin out company Artemis Intelligent Power, which has been working on leading edge technology in the offshore wind sector.
- Gamesa is establishing an Offshore Wind Technology Centre in Glasgow as part of the surrounding International Technology and Renewable Energy Zone (ITREZ). Gamesa is also currently considering Leith harbour in Edinburgh as a potential manufacturing base for its offshore wind turbines.
- Global wind turbine manufacturer Enercon are managing their UK sales and project management operations from Edinburgh
- SwedPower/Pöyry has opened an office for renewables (wind and ocean power) in Edinburgh. This is the largest energy consulting company in Scandinavia
Waste
Establishing the Green Investment Bank in Edinburgh will provide an opportunity to maximise its wider impact and ensure it contributes to meeting UK waste targets.
With a growing pipeline of waste to energy projects in Scotland, Edinburgh provides a great platform for project development, arising from easy access to project partners (developers, financiers) and supply chain. Evidence of innovative, low cost and well managed projects in proximity to Edinburgh is provided below. These examples demonstrate an effective understanding of project risk and market failures.
- The City of Edinburgh Council and Midlothian Council are jointly developing a food and residual waste treatment facility in Millerhill, Midlothian. The facility could supply 7.5 MW of electricity to the National Grid as well as heat to properties in the surrounding area
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- Diageo's pioneering £65 million bio-energy and bi-product treatment plant at Scotland's largest distillery is the largest investment in renewable technology by a non-utility company in the UK. It will integrate sustainable technologies, including anaerobic digestion and biomass conversion on a commercial scale.
- The North British Distillery in Edinburgh is investing £9 million in a three year programme to generate 33% of its energy requirements from industrial waste it produces. A biogas boiler and gas engine will generate 1 MW of electricity and avoid 9,000 to 10,000 tonnes of CO2 annually while a new water treatment plant will recover up to 40% of the effluent it generates.
- The Seafield Waste Water Treatment Works in Edinburgh has installed CHP plant that is fired by methane which has been created as part of the sewage treatment process and will generate a significant proportion of the annual 3.5 MW of electricity needs of the wider facility.
- The Shanks Group is developing an anaerobic digestion facility near Glasgow which will be capable of generating enough renewable electricity to power up to 3,000 homes.
Non-domestic energy efficiency
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Extensive work has been carried out to understand the technical dynamics of the industrial energy efficiency (IEE) process. The priority now is to convert that work into bankable projects and there are potential applications for IEE in a wide range of industries including aggregates, animal feed milling, baking, brewing, cement manufacture and malting.
Scotland's industrial capacity offers significant potential to develop projects in a number of these industries. For example, the lead organisation for the Carbon Trust's animal milling process is based in Shotts; Lafarge, one of the UK's biggest cement works, is in Dunbar, and Grangemouth is home to one of the UK's main petrochemical refineries. All of these are within a 45 minute drive from Edinburgh.
A second area of potential investment by the Green Investment Bank is the energy efficiency retrofit market, which will be supported by the Green Deal. Although predominantly focused on the domestic market, there will also be potential for energy efficiency measures to be installed in existing commercial and public sector buildings under the Green Deal.
Both Edinburgh and Glasgow are considering rolling out programmes of significant scale while many of Edinburgh's advisory community are involved in developing solutions for the pathfinder Birmingham Energy Savers programme and developing the structure for the proposed Green Deal Finance Company.
Technical appraisal
Edinburgh has extensive access to expertise in the wide range of green infrastructure options in which the GIB is likely to participate. Its credentials in offshore renewables are internationally recognised and it has a long track record in energy efficiency and the built environment.
In the area of waste, some of the most innovative schemes have emerged from developers and financiers who, in turn, have drawn upon skills from the Edinburgh City region.
Most importantly, the Edinburgh location offers ready access to expertise to deliver pre-transaction functions such as technical project appraisals.
Technical specialist advisers with expertise across green infrastructure sectors who are established within a radius of Edinburgh include; Arup, Jacobs, Atmos Consulting, Frazer-Nash Consultancy, Garrad Hassan, Grontmij, Mott MacDonald, Natural Power, Royal Haskoning, RPS, Sgurr Energy, SLR, Wind Prospect, WSP, Turner & Townsend, and Xi Engineering Consultants. It is estimated that these firms employ around 700 staff between them.
This pool of expertise is growing due to a strong academic and research base that has an internationally recognised specialism in low carbon technology - especially in relation to offshore renewables, grid development and energy efficiency.
3.2 Skills providers and research
University / Academia
Edinburgh and the surrounding region have a strong concentration of higher education and research establishments with 11 universities within an hour's travel of the city.
Many of these institutions are already undertaking cutting edge research and development in the clean energy and related sectors while others have expertise in professional services, including legal, financial and technical businesses.
As a result, close links between industry and academia already exist. Basing the Green Investment Bank in Edinburgh will help to strengthen those relationships and ensure the Bank can be highly proactive in the first of its listed activities: pre-transaction screening to identify potential deals and partnerships.
Some key examples of academic and research capabilities in close proximity to Edinburgh include:
- The new Industrial Doctorate Centre in Offshore Renewable Energy (IDCORE) will be based in Edinburgh with training provided through a range of UK universities. Students will also work alongside global leaders like EDF Energy, Shell and Rolls Royce. The centre will also form a key part of the Energy Technologies Institute's (ETI) Marine and Offshore Wind programme and address a priority area for the GIB.
- The University of Strathclyde's Institute for Energy and Environment has 200 staff and researchers covering key technical and policy aspects of energy systems such as the Wind Energy Doctoral Training Centre and Sustainable Electricity and Distributed Generation Centre.
- The Scottish Energy Centre at Edinburgh Napier University has a pre-eminent record in the development of renewable energy systems and sustainable design in construction.
- Edinburgh is home to the Scottish Financial Risk Academy, the UK's first partnership between industry and academia established to investigate quantitative financial risk management. There is also further expertise at the Glasgow Caledonian University Centre for Risk Management.
- The recent agreement between the Energy Technologies Partnership (ETP) and the Masdar Institute in the United Arab Emirates puts Scottish Universities at the heart of the development of the next generation of clean energy technology. With around 250 academics and 600 researchers, the ETP is the largest and most broad based energy partnership in Europe
- The Edinburgh Centre for Carbon Innovation fosters collaborative working between policy, community and business leaders to support and deliver workable solutions for a low carbon future. It coordinates and delivers professional skills training, working with businesses, national and local government, and civil society. The Centre is supported and hosted by the University of Edinburgh, Edinburgh Napier University and Heriot-Watt University.
- The University of Edinburgh's MSc in Carbon Management is a high-level, intensive exploration of a subject crucial to the future of business and is designed to create the next generation of carbon managers, auditors and expert advisors
"I chose the University of Edinburgh's Masters of Carbon Management because it was widely regarded as the best course available of its kind. As a hedge fund manager with over a decade's experience working in London, I needed to make the right choice that would allow me then to transition at the right level into the rapidly growing low carbon investment sector." Simon Turner,
MSc Carbon Management and fund manager.
Professional Bodies and Trade Associations
There are a large number of professional and industry bodies that support financial services and green infrastructure sectors and these will help to enhance the interaction between the GIB and the relevant professions. Institutions in close proximity to Edinburgh include;
- Chartered Institute of Bankers in Scotland - the world's oldest banking institute, promoting industry-wide standards through education and training
- Scottish Investment Operations - a professional body working on behalf of the Scottish investment industry to promote the industry and develop skills and qualifications
- Chartered Insurance Institute - plays a leading role in setting professional standards for the insurance industry
- Scottish Financial Enterprise - the representative body for Scotland's financial services industry
- The Institute of Chartered Accountants of Scotland - the world's first professional body of accountants, with 16,000 members worldwide
- Financial Skills Partnership - provides strategic leadership for training, education and workforce development in the industry
- The Institute and Faculty of Actuaries - the chartered professional body for actuaries in the UK
- The Insurance Society of Edinburgh - Edinburgh's local institute of the national Chartered Insurance Institute and has more than 1400 local members
- The Centre for Financial Market Research (CFMR) - a working group of the University of Edinburgh Business School, coordinating academic research that is of practical use to the financial services sector
- Chartered Institute of Securities and Investment Centres of Excellence at Edinburgh University
- Scottish Renewables is the representative body for the renewable energy industry in Scotland. There is a close working relationship between Scottish Renewables and Renewable UK
3.3 Thought Leadership
Edinburgh is a leading hub of green technology innovation and development. The researchers, policy makers and developers within its eco-system provide a hothouse for new ideas and thought leadership. This will provide the Green Investment Bank with access to parties involved in developing thinking on the green economy as well as those generating research and formulating investment policy at other institutions investing in green infrastructure.
This will be important in terms of soliciting third party advice to help shape the Green Investment Bank's future priorities.
- There is a strong cluster of UK NGOs based around Edinburgh including the RSPB, Scottish Wildlife Trust and World Wildlife Fund. Friends of the Earth have already expressed strong support for the GIB to be located in Edinburgh. This depth of expertise and support will be invaluable to those involved in the delivery of GIB-supported projects.
- The annual Scottish Low Carbon Investment Conference (SLCIC) held in Edinburgh brings together significant numbers of delegates from the investment and low carbon communities and attracts senior figures from around the world. This provides the investment community with greater clarity on the potential opportunities, risks and rewards and innovative funding solutions required to make the transition to the low carbon economy. The SLCIC web page hosts a section on thought leadership with significant contributions made by senior figures from the worlds of finance and green infrastructure
- The 2020 Climate Group, based in Scotland, is a unique collaborative grouping which provides strong, visible business leadership to reduce carbon emissions and helps drive innovation through partnerships and synergies between members. It targets its resources and expertise to accelerate development and investment in heat, electricity, waste, transport, rural land use and forestry. The 2020 Finance and Investment Sub Groups have representation from financiers, developers and investing institutions and regularly have constructive dialogue on the financing and investment challenges of the renewable energy industry
4. Cost effectiveness considerations
"In considering the appropriateness of a location for the Green Investment Bank's offices, the Secretary of State for Business will have regard to how that location is likely to affect the overall cost effectiveness and affordability of the GIB."
4.1 Office costs
The most common way to identify and compare office costs is to analyse the rents charged on prime office space in each market. The table and chart below show average prime office rents in Edinburgh and seven other major office markets in the UK as reported by the Valuation Office Agency and five property consultancies. Due to the considerable variations in reported prime office rents, a mean figure has been calculated for each market.
| Prime office rents in UK office markets (pounds per square | |||||||
| Market | Valuation Office Agency | CB Richard Ellis | Drivers Jonas Deloitte | DTZ | GVA | King Sturge | Mean |
| West End | £80.00 | £85.00 | £85.00 | £85.00 | £80.00 | £80.00 | £82.50 |
| City of London | £52.50 | £52.50 | £55.00 | £53.50 | £55.00 | £53.50 | £53.67 |
| Glasgow | £28.50 | £27.00 | £27.00 | £28.50 | £28.50 | £27.50 | £27.83 |
| Manchester | £23.50 | £28.50 | £28.50 | £29.00 | £29.50 | £28.00 | £27.83 |
| Aberdeen | £25.00 | £30.00 | N/A | N/A | N/A | N/A | £27.50 |
| Edinburgh | £27.00 | £27.50 | £26.00 | £27.50 | £26.50 | £28.00 | £27.08 |
| Birmingham | £24.00 | £27.50 | £27.50 | £27.50 | £27.50 | £28.00 | £27.00 |
| Leeds | £22.50 | £25.00 | £24.00 | £25.00 | £28.00 | £27.00 | £25.25 |
As the table above highlights, office space in the City of London is almost double that of all other large cities in the UK, while the West End of London is considerably more expensive than the City. Outside of London, however, the average prime office rents are roughly the same with only marginal differences reported between Aberdeen, Birmingham, Edinburgh, Glasgow, Leeds and Manchester.
4.2 Transaction costs
Edinburgh offers access to a high quality labour force at lower cost across the range of functions, due to significantly lower living costs compared to the City of London.
Edinburgh is a highly compact and walkable city, with a fifth of commuters walking to work. This encourages informal meetings and networking, helping reduce transaction costs.
Median earnings across employees in financial services in Scotland, for example, are around 90 per cent of the UK average and only 53 per cent of the London average. Looking at specific roles, the difference is most pronounced for managers and senior officials, where median earnings are around 82 per cent of the UK average and 57 per cent of the London average.
5. Basic Factors
"The proposed location must satisfy the basic needs of the GIB as an organisation to have (a) good national and international transport and communication links and (b) appropriate available office accommodation with good energy efficiency and environmental performance ratings".
While these may be considered basic factors, they are two areas in which Edinburgh excels and will ensure the Green Investment Bank has easy access to customers and suppliers, both in the UK and overseas, as well as provide an environmentally friendly yet prime office location in the city centre of Edinburgh that will be of significant benefit to its staff.
5.1 Transport
Edinburgh is one of the most well-connected cities in the UK when it comes to the range of transport options available.
From Edinburgh there is quick and easy access to all parts of the UK where green infrastructure is being developed. This will give the Green Investment Bank access to a high concentration of businesses in all segments of the UK supply chain.
UK connectivity
- All points within the UK are served from Edinburgh airport, with scheduled flights to at least 15 airports. Journey time from Edinburgh airport to any location in Edinburgh is no more than 30 minutes.
- The air route between Edinburgh Airport and Heathrow Airport is the busiest domestic route in the UK, carrying 1.3 million passengers in 2010. In total, there are over 40 flights between Edinburgh and London each day.
- In the financial sector, there is a "virtual corridor" between Edinburgh and London City airports with early morning flights arriving in each city before 9am.
- Glasgow International Airport is a 50 minute car journey from Edinburgh and offers a complementary range of UK and international flights.
- There are approximately 40 trains between Edinburgh and London each weekday, with the quickest route taking four hours. Edinburgh also offers easy access to key English cities through the rail network with direct links to Newcastle, York, Leeds, Manchester and Bristol
- There are approximately 260 trains between Edinburgh and Glasgow each weekday, with the quickest route taking 50 minutes.
Local connectivity
- The A720 Edinburgh City Bypass links Edinburgh directly to trunk roads including the westbound M8 (60 minutes drive to Glasgow); the northbound A90 (90 minutes drive to Dundee); and the A1 (90 minutes drive to Newcastle).
- Lothian Buses carries 350,000 passengers on 50 routes daily in and around Edinburgh. In November 2011, Lothian Buses was named Top City Operator of the Year at the UK Bus Awards
- Edinburgh is a highly compact city, encouraging green travel. In 2009/10, 19% of all commuters in Edinburgh walked to work, while 7% cycled.
Global connectivity
- The number of international destinations served by direct flights from Edinburgh airport has increased to 109 airports in 99 cities.
- Edinburgh airport carries over 9 million passengers annually with over 40 airlines serving international hubs such as Heathrow, Paris-Charles de Gaulle Airport, Frankfurt am Main Airport and Newark Liberty International Airport in New York.
- Edinburgh is now three hours or less from major airport connections in Denmark, Finland, Norway and Sweden, where there is significant development in a range of sub-sectors in the clean energy industry, including wave, offshore and onshore wind and district heating.
- The city also benefits from complementary services from Glasgow Airport. Most notably, Emirates offers twice daily services to Dubai which provides one-stop connectivity to key Asian markets
5.2 Information and communications technology
As an international centre for science, technology and financial services, levels of e-connectivity in Edinburgh are among the highest in the UK.
- Edinburgh has the highest average broadband synch speeds in the UK (10.1 megabits per second). 82% of addresses in Edinburgh fall within the coverage area of super-fast broadband networks. The capital offers an excellent choice of high bandwidth networks and is located on the UK backbone of every major telecommunications carrier. Edinburgh is one of the first cities in the UK to access BT's superfast broadband.
- A recent study by independent consultants Farrpoint demonstrated that the cost and availability of ICT services in Edinburgh was at least as good as, if not better than other regional financial services centres. The same study also showed that there is significant capacity in the city with 10Gb lines available for lease to companies.
- The ICT market is extremely competitive in the city with at least 12 suppliers in Edinburgh including AT&T, BT, Cable and Wireless, Easynet, Geo, Global Crossing, Orange, K Com, Sprint, SSE Telecom, T-Systems, Verizon and Virgin.
- The City of Edinburgh Council is preparing a multi-million pound bid for capital funding from the newly-announced Urban Broadband Fund that will aim to widen access to globally-competitive broadband provision and increase usage of wi-fi-enabled technology by 2015.
- Scotland has strong resilience in its telecommunications infrastructure with at least three paths to international exchanges via the East Coast, West Coast and the North Sea. This ensures that connectivity will not be lost.
5.3 Office availability
It is estimated that the GIB will need approx 6,000 - 8,400 sq ft on the basis of 120sq ft per employee for 50-70 employees. To meet this need, Edinburgh has a wide range of appropriate available office accommodation with good energy efficiency and environmental performance ratings.
The Exchange District (close to Haymarket Railway Station) is home to 31 financial companies including Scottish Widows, Standard Life, Artemis Asset Management and Quayle Munro. Over 50 financial companies are based in the City Centre (close to Waverley Station), including Aberdeen Asset Management, Triodos, Execution Noble, Citi, and the Scottish headquarters of the Lloyds Banking Group. Edinburgh Park, also with its own train station and proximity to the airport, is home to 11 further financial companies including AEGON, RBS, JP Morgan and Computershare. All three of the main financial districts are linked into the new tram system.
The City of Edinburgh Council is committed to guaranteeing the Green Investment Bank its first three years' accommodation in Edinburgh on a rent free basis.
In the initial GIB set up phase, the City of Edinburgh Council will offer soft landing space, as well as provide a dedicated account manager to act as a first point of contact for any city issues and help fast track guidance and support on all aspects of local planning and building control. The Council will also help to facilitate introductions and access to key people within the City's business community and the Council's partner organisations.
A snapshot of property currently available is provided below.
| Property | Size floor plate (max) | Quoting £sqft | Green credentials | Location | Other occupiers |
| Waverleygate, Princes Street | 16,000 | £19 | BREEAM Very Good | City Centre | Microsoft, NHS, Amazon |
| Quartermile, Lauriston Place | 20,000 | £27.50 | BREEAM Very Good | Old Town | McLay Murray & Spens |
| Exchange Place, Fountainbridge | 22,000 | £27 | BREEAM Very Good | Exchange district | Hymans Robertson, Wood Mackenzie, Scott Moncrieff |
| The Cube, Leith Street | 22,000 | £20 to £27 | BREEAM Excellent | City Centre | Glenmorangie, Baillie Gifford |
| Westport, Grassmarket | 15,000 | £23 | BREEAM Very Good | Old Town | Broadcom, Ivory Sime |
| Tanfield, Canonmills | 23,300 | £18 | BREEAM Very Good | New Town | Avaloq, Craneware, Aecom, FNZ |
| Saltire Court, Castle Terrace | 35,000 | £25 | EPC C | City Centre | Martin Currie, KPMG, Dundas & Wilson |
| Edinburgh Quay 2 | 9,400 | £20 | EPC B | Exchange district | Lloyds, Baker Tilley, Companies House, Barclays |
| Fusion, Logie Green Road | 31,000 | £16 | BREEAM Very Good | New Town | None |
| 7 Lochside View | 19,000 | £15 | BREEAM Very Good | Edinburgh Park | JP Morgan, JDSU, Business Stream |
All of the accommodation outlined above is in Grade A buildings and have parking facilities.
5.4 Economic Impact
BIS has noted that consideration will be given to the wider economic benefits that the GIB will deliver to the local economy.
Edinburgh is a significant contributor to the UK economy and was the only area of the UK to experience economic growth in 2009 other than Inner London and Aberdeen. Labour productivity in Edinburgh (GVA per employee) is the highest outside of South East England. (Source: Office for National Statistics, Regional GVA)
This high level of productivity is as a result of the highly skilled workforce that exists within Edinburgh. The Green Investment Bank, and the employment it creates, will be a significant boost to the local economy.
However, the Green Investment Bank will have a far greater impact than the direct employment it will create.
It is recognised that, as different industries mature, they tend to cluster in specific regions which are characterised by having sophisticated local demand. That clustering is already taking place in Scotland, which has become the UK's leading region for low carbon technologies and green electricity generation.
Locating the Green Investment Bank in Edinburgh will build on that momentum and act as a springboard to ensuring the UK becomes the European centre of excellence for clean technologies.
Not only will the industry benefit from physical proximity to investors but the Green Investment Bank will also benefit from having early sight of those key technologies and products which have the potential to compete globally - technologies which are increasingly being developed in Scotland.
While the GIB's initial capitalisation of £3 billion may seem small relative to the investment requirements of the industry, if it can deploy its resources intelligently, it can achieve a positive "ripple effect" that goes well beyond the bare capital resources of the Bank.
Edinburgh's ability to source and manage significant levels of funding from global markets will help to achieve the leverage of funding available through the GIB and maximise value for money for the public sector.
Locating the Green Investment Bank in Edinburgh, where clustering is already taking place, the overall economic impact at a UK level will be greater than in other locations. This in turn will help the UK Government to deliver its low carbon objectives.
For further information
Please contact Owen Kelly
e okelly@sfe.org.uk
t 0131 247 7700
