Local Climate Bonds a cost-effective way to raise billions for councils’ green plans, says new campaign

The Green Finance Institute and Abundance Investment, supported by UK100, Local Partnerships and Innovate UK, today launch a national campaign to help local authorities issue a type of municipal finance investment – Local Climate Bonds. The campaign will target all 404 local authorities in the UK, of which over 70% have declared a climate emergency, helping them bring to market this retail investment product – a cost-effective way for them to fund hundreds of green local projects in the run-up to and beyond the critically important COP26 summit in November.

The Green Finance Institute and Abundance’s campaign will highlight the benefits of Local Climate Bonds, build a community of knowledge sharing, and provide access to green finance and municipal investment experts.

Local Climate Bonds, a type of ‘community municipal investment’, allow local authorities to raise capital to fund specific initiatives in their neighbourhoods, from wind farms to solar panel installations, rewilding and electric vehicle plans, and investors can invest from as little as £5 through a crowdfunding model. Abundance has calculated that these bonds could raise as much as £3 billion if issued by the 343 local authorities in England.

The need for local authorities to innovate has been exacerbated by the impact the response to the pandemic has had on the public balance sheet. Faced with a further £9.7 billion of COVID-19 cost pressures and income losses estimated for 2020-211, Local Climate Bonds offer a source of funds cheaper than the Public Works Loan Board, a way to diversify their funding base, and a valuable way to engage constituents in plans for decarbonisation and projects identified in their environment strategies, encouraging wider collective action.

For citizens, the Local Climate Bond provides a low-risk and fixed return investment, comparable to other Government-backed investments such as Gilts, and a way to mobilise their savings to help tackle the climate emergency in their area.

The Government confirmed on 1 July the issuance of the UK’s first green bond in September 2021, cementing its endorsement of this type of finance for a green recovery.

Dr Rhian-Mari Thomas OBE, Chief Executive, Green Finance Institute, says, “We need to mobilise significant investment to meet our decarbonisation objectives; Local Climate Bonds are an important part of this target and of the growth of green finance in the UK. This campaign will support councils to access cost-effective financing to deliver place-based transition projects for inclusive, resilient, net zero communities, and provide local residents with an attractive opportunity to invest in the long-term future of their communities.”

Karl Harder, co-founder and Managing Director, Abundance Investment, said: “We are very pleased that so many councils are recognising the strong connection between their citizens and financing the infrastructure we need to get to a net zero future. Warrington and West Berkshire are

leading the way in empowering local action on climate change – we hope that many more will follow their great example.”

Polly Billington, Chief Executive, UK100, says, “Local authorities are pioneering new ways of raising funding for the green projects they identify, adopting financing tools that contribute to unlocking their potential to lead on the place-based transition to Net Zero.”

Sean Hanson, Chief Executive, Local Partnerships, says “Local Climate Bonds will give citizens a direct link to investing in our future and responding to the climate crisis, locally and in true partnership. There are so many local projects that will benefit and Local Partnerships is fully supportive of the initiative taken by the Green Finance Institute and Abundance.”

Amy Flynn, Sustainable Innovation Fund, Innovate UK, says, “Providing access to community-based green initiatives comes at a critical time in the global sustainability agenda. Seeing the Green Finance Institute and Abundance Investment launch this campaign will bring greater awareness to the effects of climate change and environmental sustainability and how innovation can help address them.”

Andy Burnham, Mayor of Greater Manchester, said: “It is a critical time for councils to harness the expertise and the local knowledge they have to help their residents meet the net zero carbon challenge, sharing best practice and championing progress. The Local Climate Bonds’ way of funding decarbonisation projects all over the UK will also support thousands of good green jobs, including in retrofitting our homes, moving away from fossil fuel transport and improving natural biodiversity. The newly-formed Greater Manchester Retrofitting Taskforce will be considering innovative financing options such as these.”

Local Climate Bonds have so far been piloted by West Berkshire and Warrington councils in 2019 and 2020, raising £2 million in total used to fund projects including solar panels, habitat restoration, tree planting and LED lighting.

Ross Mackinnon, West Berkshire Council’s Executive Member for Finance and Economic Development said,

“The delivery of the bond has been a real success for us and has enabled the Council to not only achieve an engaging way of utilising a cheaper form of borrowing for our net zero ambitions, but we’ve also leveraged in further donations to our successful wildflower verges projects to enhance biodiversity in the local area.”

More information can be found from 13 July at www.greenfinanceinstitute.co.uk/LCBs.