Local Climate Bonds have the potential to raise millions of pounds for green projects in the UK. They are regulated investment products launched by Councils to access cost-effective funding for specific decarbonisation projects, offering local people an opportunity to invest in their area in a way similar to crowdfunding and to make a return from doing so.
‘The possible funding options should consider innovative sourcing of finance and funding streams for the project, in addition to traditional sources of capital and revenue.’
Guide to Developing the Project Business Case, HM Treasury Green Book
What are Local Climate Bonds (LCBs)?
- Pioneered as Community Municipal Investments by Abundance Investment in 2020, they are regulated debt instruments issued by Local Authorities to raise money directly from the public.
- They create a powerful model for Councils to engage with citizens as investors, with anybody able to invest £5 or more via a crowdfunding platform accessible to ordinary investors.
Why would a Local Authority decide to issue one?
- LCBs allow Local Authorities to create interactions with their local community while diversifying their sources of funding and help meet their net zero targets.
- They are also designed to price below the prevailing Public Works Loan Board (PWLB) rate at the time of issuance.
- Local investors may decide to donate all or part of their interest payments back to the Council to finance specific projects, making the solution even more cost effective.
- When issued in the form of peer to peer loans, they give the opportunity for the investment to be held in an Innovative Finance ISA, which allows residents to access ISA tax benefits, enabling Councils to reach new investors and begin to tap into the £650 billion ISA market.
What is the LCB Campaign?
- The Local Climate Bond Campaign was launched in the Summer of 2021 by the GFI and Abundance Investment, supported by UK100, Local Partnerships and Innovate UK to raise awareness and support Local Authorities in the issuance of a LCB or related municipal finance investment.
- In the specific, the Campaign aims to highlight the benefits of LCBs, build a community of knowledge sharing, and provide access to green finance and municipal investment experts.
Which pioneering Councils have been the first to explore an issuance?
- Following the successful issuance of the first LCBs on the Abundance Investment platform by West Berkshire and Warrington in the Summer of 2020, a group of seven pioneering Councils signed the LCB Pledge in 2021, committing to issuing a bond or related municipal investment in the 18 months following COP26.
- In September 2021, we announced the first group of five pioneering Councils to sign the Local Climate Bond Pledge. In November 21, at COP26, the next two Councils joined the Campaign.
- Among these, the London borough Councils of Islington and Camden have been the first of the seven to subsequently successfully issue a Community Municipal Investment to invest money in low carbon projects.
- As the appetite for place-based finance products grows, it is hoped that other investment platforms will join Abundance in supporting Councils to offer Local Climate Bonds. See below for business cases around previous issuances and more information on how to join the Campaign
What types of projects have been developed with the funds raised through LCBs?
- With the LCB Pledge, Local Authorities aim to raise funding for a specific local net zero project(s), committing to set and share publicly their target dates for completion, and to provide public updates on their measurable positive impacts.
- This means that LCBs need to be deployed in funding Councils’ Climate Emergency and Net Zero Plans, for example through the installation of solar panels on Council’s facilities, the development of Electric Vehicle charging points or urban tree planting. You can find information on these projects and the case studies of issuing Councils in the section Committed Councils
- To read more on the potential projects that can be explored by Local Authorities when mobilising funds for green sectors, and learn about the Green Finance Institute’s programmes and outcome-focused coalitions, you can visit: Coalition for the Energy Efficiency of Buildings (CEEB); Coalition for the Decarbonisation of Road Transport (CDRT); and Mobilising Private Finance for Nature.
In July 2022, main founding partners, supporters and interested local authorities gathered during a dedicated roundtable to discuss the key developments in the LCB market over the past year.
Signatories to the LCB pledge
Join our Local Climate Bond Campaign
- Join the growing list of Local Authorities committed to launching a Local Climate Bond, or related municipal climate investment by signing the Local Climate Bond pledge
- Efficiently finance Net Zero projects in your local area, while communicating action, demonstrating leadership and engaging your residents with your climate emergency plans.
- Work with us to find joint opportunities to showcase the impact of the Local Climate Bonds Campaign in your community
In their own words
The delivery of the bond has been a real success for us and has enabled the Council to not only achieve an engaging way of utilising a cheaper form of borrowing for our net zero ambitions, but we’ve also leveraged in further donations to our successful wildflower verges projects to enhance biodiversity in the local area.
Ross Mackinnon, West Berkshire Council’s Executive Member for Finance and Economic Development
This gives people a fantastic opportunity to make a positive contribution towards a carbon neutral future while providing them with a financial return and deeper engagement with one of Britain’s most environmentally-focused local governments.
Russ Bowden, leader of Warrington Borough Council
Tackling the climate emergency and creating a cleaner, greener, healthier borough is a leading priority for the Council, but it’s always been clear that we can only achieve that with the support of local people. We now look forward to using this £1 million to fund a range of exciting initiatives that will make a real, tangible difference to people across our borough.
Rowena Champion, Islington Council’s Executive Member for Environment and Transport
Working with Cotswold residents, we aim to make the Cotswolds cleaner, greener and healthier. This is the first investment of this type to be issued by the Council and the first in the county of Gloucestershire. Residents can put their money to work to make a real difference towards delivering the Council’s 2030 vision to cut emissions and create safer, cleaner streets across the District.
Joe Harris, Leader of Cotswold District Council
Episode two: Louise Wilson, co-founder and joint managing director, Abundance Investment
How can local authorities leverage the power of the crowd to finance local green solutions? Hosts Helen Avery and Ryan Jude are joined by Louise Wilson of Abundance Investment to dive into Community Municipal Investments, which allow the general public to invest as little as £5, through their local authority, in green projects such as hybrid battery storage and solar projects. With two local Councils in the UK having launched their CMIs this summer, Louise discusses her organisation’s ambitions to scale up the initiative. Helen also asks Louise about a nature climate bond launched in Scotland which helps part fund green spaces and nature.