Patrick Hargreaves, Parliamentary Officer, UK100
Patrick HargreavesUK100
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Financing the Transition
In June 2023, UK100, acting as the secretariat for the APPG on Sustainable Finance, convened a policy roundtable in the House of Lords. This gathering brought together private finance experts, local leaders, and parliamentarians to discuss de-risking local climate finance. The discussion highlighted key opportunities and challenges for local authorities seeking investment for Net Zero projects. Below are some of the top takeaways for council leaders.

Utilise innovative financing models like local climate bonds

There is a need for greater diversity in how Net Zero projects are funded at the local level. The Green Finance Institute has initiated the Local Climate Bond Campaign to assist local authorities in sourcing funding for green projects from within their own communities.

Not only does this create a revenue source for Net Zero projects, but also fosters community buy-in as residents can see their investment benefit their neighbourhood. Best of all, when the projects generate returns, that money goes back to residents and is reinvested on the local high street — rather than going to overseas investors.

Local Climate Bonds (LCBs) were pioneered by Abundance Investment in 2020 as a new type of regulated debt instrument. Local authorities can issue these bonds directly to the public to raise money through a crowdfunding platform. The minimum investment is just £5, allowing ordinary citizens to invest in and engage with their local councils as bondholders.

For instance, Westminster City Council successfully raised £1 million in just nine days to invest in renewable projects such as solar panels, heat pumps, and LED lighting. 

To learn more about the Local Climate Bond campaign and see if an LCB would be right for your council, click here.

Leverage Technical Assistance (TA)

Local authorities can develop the best Net Zero project, but unless they speak the language of private finance, they will struggle to get support from major investors.

By engaging technical assistance (TA) in the initial stages of Net Zero projects, local authorities can get support with project design and planning with feasibility studies. TA can also ensure the project is well-structured and aligned with its intended objectives and outcomes. They can provide risk management expertise to help identify potential risks and challenges associated with the project and develop strategies to mitigate them effectively. Further, by implementing robust monitoring and evaluation systems, local authorities can accurately measure the project's impact.

This support will help local authorities allay the fears of private investors and unlock millions of pounds of private investment.

Innovative Net Zero projects require expert legal and technical assistance, and the Department of Net Zero and Energy Security have a role to play in assisting local governments with developing robust project pipelines. By leveraging the capabilities of civil servants, the national government can streamline knowledge sharing for ambitious local authorities.

Speak with a united voice

A major issue for private finance investing in local Net Zero projects is the need for long-term certainty. However, short-term, piecemeal grants from central government create an insurmountable barrier to achieving this. Local governments need long-term guaranteed funding so the projects have a clear and an unambiguous timeline. Local governments and private finance need to speak with one voice to central government — short-term grants breed uncertainty and must be changed to bring more private finance into the Net Zero transition.

Take action now

UK100 encourages council leaders and other stakeholders to explore these innovative financing models, leverage technical assistance, and unite to advocate for long-term funding guarantees. Together, we can bolster private finance support for the Net Zero transition and make a significant impact on our local communities and the planet.