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New campaign calls for local climate bonds to support green developments

Local Climate Bonds can be used to fund renewable energy and electric vehicle projects. Image: Green Finance Institute.

Local climate bonds can be used to fund renewable energy and electric vehicle projects. Image: Green Finance Institute.

A national campaign to help local authorities issue community municipal finance investment for green initiatives has been launched.

The Green Finance Institute and Abundance Investment have issued the call for local climate bonds to help finance local clean energy projects, with support from UK100, Local Partnerships and Innovate UK.

It will target the UK's 404 local authorities, helping to bring to market the retail investment product, which can be used as a cost-effective way to finance such projects.

“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,” said Dr Rhian-Mari Thomas OBE, chief executive, Green Finance Institute.

The bonds would allow authorities to raise capital through a crowdfunding model, with investors able to contribute from as little as £5. These could raise as much as £3 billion if issued by the 343 local authorities in England, Abundance calculated.

Such funding can be used for specific green initiatives in neighbourhoods, such as wind farms and solar panels, electric vehicle planning and rewilding.

The group of companies said the need for innovative funding models for green projects had been exacerbated by the COVID-19 pandemic. Local climate bonds could offer a cheaper source of finance than the existing Public Works Loan Board.

Additionally, the bonds would provide a low-risk, fixed return investment for citizens, allowing them to invest their savings to help tackle the climate emergency. Initially the group is targeting the roughly 70% of councils who have declared a climate emergency

The UK’s first green bond was confirmed on 1 July by the government with the issuance set for September.

So far local climate bonds have been piloted by West Berkshire and Warrington councils over the last two years, raising £2 million for projects including solar panels.

Karl Harder, co-founder and managing director, Abundance Investment, said the councils were “leading the way in empowering local action on climate change” and hoped many would follow their example.

"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."

Beyond local authorities, the government is set to launch a sovereign green bond – or green gilt – this summer that was announced in the Budget. For the financial year there will be a total minimum of £15 billon.

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