Local Climate Bond market attracts £16 million in private funding to support local authority net-zero projects

by Green Finance Institute | May 7, 2025

• Esmée Fairbairn Foundation commits £1 million in match-funding, with the first £165,000 deployed today to local authority green investments
• Unity Trust Bank becomes the first institutional investor committing an initial £15 million to scale the market and support critical local climate action
• Green Finance Institute and Abundance Investment worked in partnership to originate and channel institutional investments into the market for municipal investing to drive asset class growth

London, 7 May 2025: Two major private investors – Esmée Fairbairn Foundation (“Esmée Fairbairn”) and Unity Trust Bank (“Unity”) – have committed significant funding to scale the green municipal investment market (also known as Local Climate Bonds), opening new opportunities for local authorities to accelerate their net-zero projects.

The commitments made reflect confidence in municipal investing’s ability to combine strong, predictable returns with tangible local impact. These local authority green investments deliver a scalable solution for citizen-led financing of place-based climate initiatives making a difference to cities and communities across the UK.

According to the UK government, 82% of all greenhouse gas emissions fall within the scope of local authorities’ influence, positioning them as key actors in the country’s transition to net zero[1]. Since 2019, over 320 local authorities (75%) in the UK have declared a climate emergency and committed to delivering net-zero ambitions in their communities.

Despite their influence and determination to act, local authorities are facing mounting challenges. According to the Local Government Association (LGA), over two-thirds of local authorities are not confident they will meet their net-zero targets under current funding arrangements, while over 90% say financial support is inadequate and excessive bureaucracy is blocking progress[2]. Local authorities deliver a range of services and are often directly responsible for initiating and implementing local net-zero projects – all while navigating increasingly challenging financial situations.

Against this backdrop, municipal investing offers local authorities an innovative borrowing mechanism. Developed by Abundance Investment and supported by the Green Finance Institute (GFI), local authorities raise capital directly from private investors – both citizens and institutions – giving communities a tangible stake in local climate action. Unlike other funding mechanisms – such as developer levies or grants that often depend on external partners – municipal investing provides local authorities with direct funding that can be deployed within their own capital programmes. Local authorities can therefore work with their communities to deliver practical local projects such as renewable energy schemes, building retrofits, green infrastructure initiatives, and nature adaptation schemes like rewilding and tree planting. This also brings significant social benefits by building a stronger, more engaged relationship with residents who can invest from as little as £5.

Miles Ashton, Associate Director, Local Green Investment at the Green Finance Institute, said:

“The Green Finance Institute is proud to have championed this approach to investing in councils, providing leadership in developing innovative financial solutions that meet the urgent funding needs of local authorities while engaging communities directly in the transition to net-zero. Now with 14 pioneering local authorities taking the lead, £11.5 million in private capital from over 2,750 investors has been mobilised for much-needed local environmental and social impact projects.

“The success of Abundance’s platform in mobilising citizen investment demonstrates the strength and scalability of the model, and it’s incredibly exciting to be in a position now where we are not only supporting local authorities but originating deals with institutional investors and foundations to accelerate the growth of this market.”

Esmée Fairbairn Foundation commits £1 million match-funding

Esmée Fairbairn, one of the UK’s largest independent social and impact investors, has committed £1 million over the next two years to match-fund the amounts from local residents into local authority green investments via Abundance’s platform.

The first tranche of £165,000 is allocated today to three open local authority investments, Bristol, Hackney, and Hammersmith & Fulham. A range of vital green projects will be funded through these investments, including greening measures for community buildings, expansion of green infrastructure such as rain gardens and natural flood management, and energy efficiency upgrades for a school. For every pound invested by local residents, Esmée Fairbairn will part-match it at a 50% rate, providing a powerful incentive to increase community participation and accelerate local climate action.

Gillian Dickson, Social Investment Manager at Esmee Fairbairn Foundation, said:

“We are excited to be partnering with Abundance on this initiative to demonstrate and scale an alternative climate focused approach to deliver the climate outcomes we care about. The match funding of investment by local residents will support communities to have a greater stake in local regeneration and build citizen agency around local climate action. When it comes to the places we live in, we are proud to back people and organisations who are making their local communities more vibrant, confident and economically resilient”.

Unity Trust Bank becomes the first institutional investor to back this approach to local green investment with a £15 million commitment

Unity Trust Bank, a purpose-driven UK bank focused on social and environmental impact, has committed an initial £15 million to invest. The funding will be co-invested alongside citizen investors across multiple raises, helping to scale the market and support more local authorities in delivering critical local climate projects.

Unity’s investment aims to demonstrate that investors can achieve positive impact while maintaining attractive risk-return profiles. Unity’s mission is to contribute to a better society and the inclusion of green municipal investing within its Treasury portfolio aims to strengthen the bank’s support to the public sector to deliver positive social and environmental impact. The bank views this way of investing in councils as a strategic opportunity to support scalable, localised solutions to the climate crisis.

Joshua Meek. Chief Impact Officer at Unity Trust Bank, said:

“Unity is excited to lead the way and become the first UK bank to make a commitment to green municipal investing and further strengthen our support of the public sector and local councils. We believe investing this way in councils provides the ideal platform for communities and organisations like Unity to work together and support local solutions to climate change, and we would encourage other impact-driven investors to consider how they too can support the vital work of grassroots authorities.

“As a ‘double bottom line’ bank committed to delivering sustainable returns alongside real benefits to society, municipal investing supports inclusive economic growth, sustainable solutions to climate change and a positive investment opportunity for Unity.”

Karl Harder, Co-founder and Joint Managing Director of Abundance said:

“Esmee and Unity publicly investing alongside citizen investors is a pivotal moment in the growth of municipal investments, and a vote of confidence in councils and our platform. As a group, we are aligned on the aim of building a lending platform centred on the creation of many vibrant communities of resident lenders, who are all engaged with their local council.

“This isn’t just a cost-effective borrowing source for councils. It is a way to build a community that is really engaged in their climate action plans. We are already seeing evidence that investing can be a gateway to citizens taking further action – for instance some investors have chosen to donate their interest back to the council and support other place-based initiatives in their community. We are excited to see more councils using the model as a result of Unity and Esmee’s involvement.”

Councillor Rowan Ree, Hammersmith & Fulham Cabinet Member for Finance & Reform, said:

“This match-funding is fantastic news for our local investors who’ve already put £2 million into greening Hammersmith & Fulham through our pioneering scheme. By bringing together residents and big institutions we’re creating more green spaces for local people while protecting nature in our borough – another example of our ruthlessly financially efficient approach to creating a stronger, safer and kinder borough.”

Councillor Tony Dyer, Leader of Bristol City Council, said:

“This commitment to additional funding is very welcome and demonstrates the confidence that Esmee Fairbairn and Unity Trust Bank have in councils like Bristol City Council and our ability to take both climate action and build community wealth. By working closely with Abundance on our Bristol Climate Action Investment we aim to widen opportunities for citizens to invest in the future of the city, to build a cleaner, greener and healthier environment, and to feel proud of where they live and belong.”

Councillor Sarah Young, Hackney Cabinet Member for Climate Change, Environment and Transport, said:

“Hackney is proud to have one of the most ambitious climate action programmes in the country. Thanks to this innovative match-funding agreement, our residents’ support will now go even further, helping us install more solar panels and energy-efficient windows on local schools and estates, reducing energy bills, carbon emissions, and delivering greater benefits for a greener, healthier Hackney. This pioneering partnership will continue to build confidence in the value of this low-risk, high-impact investment model that is helping councils like ours deliver on our essential climate goals, even within today’s financial constraints.”

[1] HM Government (2021), Net Zero Strategy: Build Back Greener, https://assets.publishing.service.gov.uk/media/6194dfa4d3bf7f0555071b1b/net-zero-strategy-beis.pdf

[2] Local Government Association (2024), Net zero strategy and support: Research report, https://www.local.gov.uk/sites/default/files/documents/Net%20Zero%20-%20Strategy%20and%20Support%20-%20Final%20-%20Report.pdf