A nationwide scheme has been launched to help tackle climate change by encouraging residents to invest in their local councils.
The programme, based on University of Leeds research, aims to fund environmentally-friendly projects, generate jobs and create more appealing interest rates for savers.
The first of six pilot projects for local government green bonds has been unveiled by West Berkshire Council with others soon to follow, including in Warrington and Leeds.
These pioneering bonds, known as a Community Municipal Investment (CMI), have been developed with ethical investment platform Abundance.
With the potential to be rolled out across every local authority in the UK, CMIs could unlock £3 billion for councils to finance initiatives that neutralise or eliminate carbon emissions – known as net-zero strategies.
Dr Mark Davis, Associate Professor at Leeds’ School of Sociology and Social Policy, led the four-year research that underpins the initiative.
He said: “We know that local authorities are on the frontline of some of the biggest social and environmental challenges our communities face.
“Despite this, they have lost around 60% of central funding since 2010, have had their usual borrowing channels impacted by rate changes and now have to contend with the COVID-19 pandemic.
“The CMI we created in our research with Abundance is helping to finance local projects that help to tackle the climate emergency and related social crises.
“And as interest rates for savers are cut to almost zero, the CMI should offer a better long-term return for people. It’s exciting to see our research having such a tangible impact.”
CMIs allow councils to offer a regulated investment directly to their residents for the first time.
West Berkshire Council has launched a green bond to raise £1 million from its citizens to fund solar panel installations on five council-owned buildings, including a building at Greenham Common and two local schools.
The CMIs are arranged by Abundance – which is regulated by the Financial Conduct Authority – and are ‘a new, lower risk investment product comparable with government-backed investments.’
Councillor Ross Mackinnon, West Berkshire’s Executive Member for Finance and Economic Development, said: “We are very excited to be the first council to offer CMIs to our residents and community groups.
“They are a ground-breaking way to put residents’ money to work to help us build back greener after the pandemic.
“Communities investing directly with us will provide us with a cheaper alternative to conventional sources of funds reducing the overall cost of borrowing to all taxpayers across the district as well as making a positive contribution toward our target to be carbon neutral by 2030.”
All three initial pilot schemes in West Berkshire, Warrington and Leeds will use CMIs to finance rooftop and ground-level solar installations.
Abundance’s analysis also shows that CMIs could have a potential impact of as much as £3 billion if taken up by all 343 local authorities in England.
Bruce Davis, co-founder and Managing Director of Abundance Investment, added: “Working with several councils, Abundance has drawn on the best of this legacy to create an innovative model for the 21st century which provides a powerful tool for tackling the major challenge of our time: climate change.”
A recent report from Abundance, funded by the Place-based Climate Action Network (PCAN), showed that 73% of UK savers and investors would consider investing in a CMI.
