ROYAL Bank of Scotland's corporate and institutional banking arm is today launching a £200 million fund to help businesses invest in new technology to reduce energy costs.

The bank said it plans to provide lower lending rates to companies by using the UK Government's Funding for Lending scheme.

The Carbon Reduction Fund is being targeted at firms with turnover of more than £25 million.

It is planned to finance sustainable energy projects, such as fitting buildings with more efficient lighting, providing on-site wind power or installing more environmentally friendly heating options, such as ground source heat pumps.

The bank expects the fund to prove particularly attractive to manufacturers keen to reduce the burden of rising energy bills.

Chris Sullivan, chief executive of RBS Corporate, said: "Businesses of all shapes and sizes can make significant savings from being more efficient as energy costs continue to rise.

"We hope to offer businesses both an incentive and a solution to transforming their energy use and carbon footprint.

"We've seen huge benefits within our own business here at RBS from introducing energy efficiency measures and the sourcing of energy from renewable sources."

Jane Stevensen, director of sustainability for Grant Thornton, said: "With the Energy Bill just announced last week and mandatory carbon reporting coming in from next April, this sort of innovation in sustainable financing has the potential to open up opportunities for businesses at a really advantageous time."

RBS already has a renewable energy fund for SMEs and other energy efficiency-related products at asset finance arm Lombard.

The UK is aiming to cut greenhouse gas emissions to 34% below 1990 levels by 2020 and 80% below by 2050.

Figures published last week showed major banks and building societies drew £4.4 billion for the Funding for Lending scheme in the first two months since its launch in August.

However, overall net lending only increased by £500m, with RBS reporting its net lending actually fell by more than £640m due to the running down of impaired assets.