GFI: UK councils could unlock £3bn of green investment through climate bonds

Pictured: Solar farms in Warrington partly supported with bond proceeds. Image: Gridserve

The Green Finance Institute (GFI) has today (1 November) launched a new ‘Local Climate Bonds Toolkit’ intended to support councils in the development of localised green bonds – similar to the £16bn package designed by the UK Government in 2021 but on a more localised scale.

Through Local Climate Bonds, councils can raise funding that can be ring-fenced for initiatives to reduce emissions from the energy, transport and buildings in their area. Anyone can invest – individual or organisation – and the minimum investment amount is £5.

The councils of Warrington and West Berkshire were the first in the UK to pilot this approach, each raising £1m in 2020. Since then, a further six councils have issued their own bonds, namely Islington, Camden, Cotswold District, Telford and Wrekin, Westminster and Lewisham.

Collectively, these eight councils have raised £6.4m to invest in energy efficiency improvements for buildings, nature restoration, renewable energy and electric vehicle charging infrastructure.

Experts at the GFI estimate that local authorities could unlock up to £3bn in green investment for their communities by developing and launching their own Local Climate Bonds.

This could be a crucial lever for the UK’s delivery of its legally binding net-zero target. The Government’s own Net-Zero Strategy states that 82% of all UK emissions are within the scope of influence of local authorities.

The good news is that 75% of local authorities in the UK have started to update their climate plans since 2019 and are exploring ways to finance delivery. But the GFI has seen a need for council staff to be provided with more in-depth information about the Local Climate Bonds issuance process – hence the launch of the Toolkit.

The GFI’s local green investment lead Miles Ashton said: “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.”

UK100’s chief executive Christopher Hammond said the toolkit launch has come at a crucial moment because councils are “facing increasingly stretched budgets” in the current economic downturn and “need innovative finance to deliver climate action”.

Related news: Global green bond issuance reached record levels in first half of 2023