The UK government is to begin a “staged privatisation” of the Green Investment Bank (GIB), aiming to sell a majority stake in the bank by 2020.

Sajid Javid, secretary of state for business, innovation and skills, said reducing the government’s stake would grant the institution the “room and resources” to grow.

A privatisation would allow GIB, currently subject to European Union state aid rules, to invest in a greater number of green infrastructure sectors.

At present, it is limited to five areas – including offshore wind, community-scale renewables and energy efficiency projects.

The bank has already attracted private capital to its ventures, setting up a standalone fund management entity that launched an offshore wind-farm fund.

The fund was seeded with assets owned by the bank and has attracted commitments from UK pension funds, including Strathclyde Pension Fund, and the Abu Dhabi Investment Authority.

Javid said a majority stake in the bank would be sold “in the lifetime of this Parliament”, giving the government until the next expected election in 2020 to achieve its goal.

He added: “Now I’m sure some people will say this shows that government is reneging on its environmental commitments – that we are throwing, somehow, our much-vaunted green credentials into a coal fire furnace.

“But such cynics could not be more wrong. The bank will still be green, it will still be profitable, it will still be a market-leader in financing environmentally sound infrastructure.”

Lord Robert Smith, chairman of the bank, argued that, while government support – in the shape of £3.8bn (€5.3bn) in capital, of which £2bn has been deployed to date – was vital to the GIB’s initial success, it would be unable to build on its success as long as the state held a “significant” stake in the organisation.

Smith said he was unsure how the privatisation would proceed, and that it could either involve the immediate sale of a 51% stake or a more gradual reduction.

Shaun Kingsbury, GIB’s chief executive, said the bank’s board would be advised by UBS, and that the Department for Business, Innovation and Skills would be advised by Bank of America Merrill Lynch on details of the privatisation.

He also said questions on whether the government would leave the currently outstanding £1.8bn in capital with the bank after privatisaton had yet to be finalised.

Asked about the potential for the bank to access the green bond market, Kinsbury said the market was “burgeoning”, and that, after privatisation, GIB would consider taking on responsible levels of debt including from those interested in green bonds.

“One of the challenges of the green bond market is [that] it’s not really easy today to compare how green the bonds are,” he said.

Kingsbury added: “Could we play a role in defining how green a green bond is and getting a rated system [for it]? We could, and that’s one of the areas we’ll be working on over the next year.”