Green Finance Institute publishes its “Local Climate Bonds Toolkit” to help unlock a potential £3bn opportunity for local green investment

• Toolkit aims to inform local authorities on the steps involved in issuing a Local Climate Bond

The Green Finance Institute (GFI) today publishes its Local Climate Bonds (LCB) Toolkit to support local authorities seeking to unlock a potential £3 billion in green community municipal investment opportunities which will help deliver their net zero mission.

Local Climate Bonds, a type of community municipal investment, enable local authorities to raise capital to fund decarbonisation projects in their communities such as wind farms, solar panels, rewilding, retrofit of schools, and electric vehicle charging points. LCBs were first piloted by West Berkshire and Warrington councils which raised £1 million each in 2020 and have the potential to raise billions for councils looking to invest in their green infrastructure.

LCBs are open to anybody to invest into from as little as £5 via a crowdfunding platform hosted by Abundance Investment. Almost 2,000 investors have participated in LCBs so far, receiving a return on their capital for supporting climate action, while the local authority can engage their local community on their net-zero transition.

The GFI has published this Toolkit to provide local authorities with a succinct source of information on Local Climate Bonds, outlining the optimal issuance process and tackling common misconceptions about LCBs. It features case studies from West Berkshire (the first council to issue an LCB) and Westminster City (the fastest raise by an LCB) as well as a technical FAQ. The Toolkit is available [here – add link when available online].

Following the pilots in West Berkshire and Warrington, the GFI and Abundance Investment launched the Local Climate Bond campaign in July 2021, supported by UK100, Innovate UK, and Local Partnerships. Research by Abundance Investment and the University of Leeds has calculated that LCBs could raise as much as £3 billion if issued by the 343 councils in England.

According to the UK government’s own Net Zero Strategy, 82% of all UK greenhouse gas emissions are within the scope of influence of local authorities, and since 2019, over 320 councils (75%) in the UK have declared a climate emergency, many working with their residents to shape plans of action – but access to attractive and diverse sources of funding is still a barrier to action.

Miles Ashton, Local Green Investment Lead, GFI, said: “Local authorities will be vital to the UK reaching its net zero target. Over 75% of local authorities have declared a climate emergency and have ambitious targets to reach net zero before 2050. Local Climate Bonds have enabled eight pioneering councils to raise millions for green projects, while engaging with and empowering local residents. This toolkit aims to make the issuance process easier to understand for councils exploring a Local Climate Bond.”

Joseph Holmes, Executive Director (Resources) and s151 Officer, West Berkshire Council said: “We were delighted to successfully launch the first local climate bond in the country and have been really pleased with the public response we have had. The bond was simple to launch and has enabled us to communicate our work on helping to deliver our Environment Strategy.”

Since 2020, eight councils, West Berkshire, Warrington, Islington, Camden, Cotswold District, Telford and Wrekin, Westminster and Lewisham – have raised £6.4 million to fund local net zero projects in their communities. These projects range from installing solar panels on schools cutting energy bills and emissions, to rewilding and nature restoration, to electric vehicle charging infrastructure. Westminster Council raised £1 million from 484 investors in nine days in March 2023, while Lewisham became the eighth council to issue an LCB when it launched the ‘Lewisham Climate Action Investment’ in May 2023.

Many councils across the country have been driving forward ambitious plans to transition their public buildings, places and services to support a greener, cleaner future. Local Climate Bonds are an innovative financial solution that support local authorities with their net zero ambitions and directly benefit their residents.

Cllr David Boothroyd, Cabinet Member for Finance and Council Reform at Westminster City Council said: “The City of Westminster has some of the highest carbon emissions in the country by local authority area and we need to find ways to reduce city-wide emissions by 91,000 tonnes a year if we’re to meet our goal of being a net zero city by 2040. 

We want to support residents and local businesses to make a positive impact in their neighbourhoods, by reducing their climate impact and improving the local environment and this new Westminster Green Investment scheme is one way that can help us reach our goal. Residents can invest as little as £5 to make a difference in supporting sustainable projects in their local area to create a cleaner, greener and fairer Westminster for every-one.” 

Local Climate Bonds deliver a ‘win-win-win’ for councils, communities and the planet:

• Councils are able to engage residents and businesses to raise funds to deliver sustainable, local projects as part of their transition to becoming carbon neutral, while accessing cost-effective finance through borrowing at below the Public Works Loan Board rate.
• Local residents are able to benefit from local green projects, while receiving a fixed return on their investment.
• LCBs inherently deepen the relationship between councils and their communities. Councils looking to issue successive LCBs have the opportunity to gain long-term access to low-cost funding by building a community of local investors.
• LCBs fund investment into local net-zero projects, which can support some of the most vulnerable people in society (e.g. if funds are ringfenced to make energy efficiency upgrades to social housing) and thereby help with a green and just transition.

Karl Harder, co-founder and Managing Director, Abundance Investment, said:

"Councils are on the forefront of delivering greener communities around the country, and there are millions of UK savers and investors who want to put more of their money into real, tangible climate action. LCBs make that possible, all while raising awareness of the important work councils are doing to deliver net zero. It's been a pleasure working with pioneering councils to launch these first investments, and we look forward to seeing their local investor communities growing more and more."

Christopher Hammond, UK100 Chief Executive, said:
"Facing increasingly stretched budgets, councils, now more than ever, need innovative finance to deliver climate action. Local Climate Bonds enable local authorities to fund local green projects cost-effectively in collaboration with residents. With the Green Finance Institute's support, UK100 members are already pioneering these community investments. This toolkit will help more councils unleash the full potential of Local Climate Bonds to accelerate local Net Zero."

The GFI is the UK’s principal forum for innovative green finance, uniquely positioned at the nexus of the public and private sectors, and committed to the long-term development of the LCB market. This Toolkit aims to provide local authorities with a succinct source of information on Local Climate Bonds, outlining the optimal issuance process and tackling common misconceptions about LCBs.