Local authorities must not be overlooked if the UK is to deliver its net zero 2050 goals, but further support needed

by | Jul 21, 2022

Share this article

Local authorities can play a significant role in ensuring the UK delivers its 2050 net zero targets if public and private sector support can be provided to build out financial solutions and deliver technical assistance capacity, outlines a new report from Innovate UK and the Green Finance Institute (GFI) released today.

Since April 2019, over 300 councils in the UK have declared a climate emergency. But translating local authorities’ climate ambitions into reality, through the successful financing of green projects and infrastructure, is challenging with budgets already stretched and growing pressures around the cost-of-living and rising energy bills.

The report – Mobilising local net zero investments – provides practical guidelines for local authorities regarding the net zero funding available in the short term and, importantly, aims to spark engagement around future solutions that can bring public and private capital together with a particular focus on long-term capital providers such as institutional investors.

The report coincides with the publication by the Department for Levelling Up, Housing and Communities of the England Local Authority Revenue Expenditure and Financing (Budget) 2022-23 which shows that local authority funding is tighter than ever. As a result, there is an urgent need to consider additional private finance sources to deliver zero outcomes locally, to support local authorities in sourcing additional funding sources to deliver net zero projects that will support livelihoods and communities.

Roundtables with and research alongside local authorities in 2022, conducted by Innovate UK and GFI, highlighted three core challenges that local authorities face on their net zero journeys:

  1. Financing gaps – The investment needed to finance the UK’s nationwide net zero transformation is estimated at £1.4 trillion by the Climate Change Committee and will require the mobilization of private capital alongside public finance. To close the investment gap there is a need to consider new and innovative private finance sources – with a particular focus on long-term capital providers such as institutional investors.
  2. Financial advisory gaps – Structuring innovative new public-private financial instruments will require better access to specialist financing expertise. Financial advisory capability will be needed to develop the financial structures that can unlock deeper pools of private sector capital.
  3. Project development gaps – There is a significant lack of technical assistance available to help turn concepts into investable projects with a well-developed and bankable business case. This is the most pressing obstacle to the successful deployment of capital towards net zero.

Mobilising local net zero investments finds that technical assistance capacity, innovative financial solutions, supportive government policies and de-risking mechanisms are essential to overcome these challenges and scale up the availability of climate finance to local authorities.

To achieve better outcomes, the report calls on central government to simplify how it supports the development of net zero investment. It advocates a single gateway which both informs councils of the public funding currently available to them, and provides policy and regulatory support.

The report advocates for a survey of local authorities to identify a pipeline of green projects and the amount of finance required, and gives advice on how best to engage with private finance. Highlighting that market clarity must be strengthened to provide confidence that private investors can generate an appropriate return for the risks they are asked to take. Local Authorities are encouraged to engage with Innovate UK and the GFI on this work, and many are already in discussion over their requirements, aspirations and insights.

Sophie KempthorneInnovation LeadInnovate UK, said: “Enabling local authorities to play a greater role in driving the transition to net zero presents a wealth of opportunity –  not just to tackle climate change, but to create local economic growth and ensure that the transition is a just and prosperous one. But to capture the opportunity will require better support for local authorities, plugging some of the gaps identified in this report, as well as more innovation in new and under-utilised financing mechanisms to bridge the gap between public and private funding for local net zero projects.”

Jeremy Gorelick, Strategic AdvisorGreen Finance Institute, said: “The investment needed to finance the UK’s nationwide net zero transformation, estimated at £1.4 trillion by the Climate Change Committee, will require the mobilisation of private capital alongside public finance. Crowding in private investment will necessitate developing the right commercial models and structuring bankable projects that will attract investors. This new report provides a useful summary to local authorities of the technical and financial solutions currently available to them to help to drive more investment towards place-based net zero projects.”

Share this article

Related articles

Winners of the Protection Guru Awards 2022 are announced

Winners of the Protection Guru Awards 2022 are announced

Protection Guru, has today announced the winners of Protection Guru Awards 2022. In this, their second year, the awards have been established to recognise the leading lights of the protection industry. The team at IFA Magazine extends our congratulations to all this...

Trending articles