Place-based investing for green growth
by
Place-based investing for green growth
Local leaders around the world face increasingly complex challenges as they strive to balance severe funding constraints with capacity and skills gaps. Faced with external pressures such as funding cuts, rising energy costs, and an increase in weather-related catastrophes, a solution for raising the finance for social and environmental projects may lie closer to home—within our communities.
Despite numerous opportunities for place-based action to drive resilience and decarbonisation, a lack of commensurate resources and capabilities mean local leaders are struggling to turn clean energy and wider net-zero ambitions into reality. Funding from central government is primarily allocated for project delivery rather than the preparation and development of viable projects. The resulting complex funding landscape leads to higher transaction costs, slower and inequitable access to project development and delivery funding across communities with varying resources.
An alternative approach is needed—one that funds place-based infrastructure projects that benefit communities while keeping constituents engaged.
Overcoming barriers in the UK
The Green Finance Institute (GFI) is focused on finding solutions to mobilise financing for local place-based projects. In the UK, councils are operating in a challenging fiscal environment, with limited borrowing power due to high Public Works Loan Board (PWLB) rates and soaring costs, making it difficult to deliver even core services. Since PWLB borrowing is underpinned by Gilt issuances, continued global instability and over-reliance on international investment have made borrowing expensive. English councils, in particular, have faced drastic funding cuts since the 2010s, with spending on some services reduced by up to 70%.[1]
While councils may feel financially constrained, they hold significant influence in addressing the climate emergency. According to the UK government’s Net Zero Strategy, 82% of all UK greenhouse gas emissions fall within the scope of local authorities influence.[2] Since 2019, over 300 UK councils have declared a climate emergency.[3] Research commissioned by Innovate UK indicates that place-based net-zero initiatives generate more social value per pound spent compared to national initiatives.[4]
Given their considerable influence over the net-zero agenda, local governments and their constituents should be empowered to drive local initiatives that underpin regional and national prosperity.
The opportunity of local investment
Community Municipal Investment (CMI)—also known as a Local Climate Bond—is an innovative green finance mechanism that provides councils with an alternative citizen borrowing option, delivering value for money while offering the potential to raise and deploy billions of pounds in private finance for environmental and social impact. Similar to the Green Gilt, CMIs comply with Green Loan Principles and have already funded key projects, including renewable energy installations, rewilding and biodiversity initiatives, electric vehicle charging points, school retrofits, and community climate funds.
In the UK, since CMIs were first developed and launched by Abundance Investment three years ago, 13 councils have raised over £11 million in private finance, with a strong pipeline of councils preparing to adopt the model—including interest from the broader institutional investment landscape institutional landscape.[5] CMIs are designed to save councils money by offering a lower cost of capital compared to PWLB loans. If the model were to capture even a fraction of the £1.5 trillion held in UK savings accounts, the savings on borrowing costs could be substantial.[6]
Drawing on international experience, the UK’s homegrown model has the potential to be replicated in new markets. The CMI model could form an integral part of the funding mix for local governments worldwide, advancing place-based climate action. It offers a new level of transparency by linking funds to specific projects, aligning with both local needs and national climate goals. This enables citizens to see exactly where their money is going, fostering stronger community engagement and, in some areas, sparking grassroots action.
It’s now time to scale
Over the past three years, with market development support from the GFI and in close partnership with Abundance Investment, CMIs have demonstrated market viability and replicability. Now market-ready, as demand grows, the GFI will continue leading the CMI Steering Committee and help councils attract investment through the model to deliver greater environmental and social impact.
For CMIs to thrive, they require a supportive enabling environment—where municipalities have the freedom to borrow, alongside a regulatory framework that makes it cost-effective to raise funds from citizens. This typically involves the ability to start with smaller amounts to build market momentum. Supportive regulation and emerging crowdfunding platforms across the European Union and beyond create fertile ground for expansion. In the US, the $4 trillion municipal bond market provides further inspiration, demonstrating the power of enabling individuals to invest in their local communities.
In the coming years, the GFI’s international offices will collaborate to share learnings from the UK and establish strategic local partnerships, scaling international versions of the CMI model.
For local governments, the opportunity is compelling: CMI is a powerful model to catalyse community resilience and address the fiscal challenges of green and social projects while making valuable contributions to nature restoration, energy security and climate action.
[1] IFS – What is the outlook for English councils’ funding? (2024).
[2] HM Government – Net Zero Strategy: Build Back Greener (2021)
[3] Local Government Association – Delivering local net zero
[4] Innovate UK – Accelerating Net Zero Delivery: unlocking the benefits of climate action in UK city-regions (2022)
