London has created a fund consisting of public and private sector money to finance projects needed to realize the climate, energy, and waste reduction targets of the city.

The Challenge

Due to uncertain demand, implementation of emerging technologies, and long payback periods, the inability to secure funding is a key barrier to establishing low carbon infrastructure. The London Green Fund addresses the lack of investment in London’s waste and energy infrastructure by leveraging private sector funds to achieve the twin objectives of environmental goals and financial returns.

 

The Solution

London’s goal of reducing CO2 emissions by 60% by 2025 is estimated to cost $63 billion, which cannot be delivered by public sector investments alone. Therefore, the city established the London Green Fund, in which private funding, e.g. from pension funds and commercial banks, is combined with public money to finance sustainable infrastructure projects via equity finance and loans. By mid-2015, $165 million of public money, with support from the EU, had been invested in schemes valued at $1.1 billion – a leverage of seven times the public money invested. The fund is an efficient use of public resources as financial returns can be re-invested into similar projects.

The fund has made 16 investments in energy efficiency, decentralized energy, and waste infrastructure between 2012 and 2015. The first stage of projects resulted in 35% energy savings compared to conditions before investment, while creating over 2,000 jobs. A further $780 million in EU funding has been earmarked for the second stage of the London Green Fund, and the intention is to combine this with $156 million from the European Investment Bank.

 

Environmental Benefits – The waste management projects financed by the fund will divert 330,980 metric tons of waste from landfills per year.

Social Benefits – Over 2,000 social housing properties will undergo energy retrofitting, which will provide financial and social benefits to low-income citizens.

Health Benefits – Nearly $7 million in savings are expected from the energy efficiency projects financed by the fund.

 

About Cities100

Presented by C40 Cities Climate Leadership Group (C40), Sustainia and Realdania – Cities100 showcases leading solutions to urban climate challenges in ten sectors, ranging from solid waste management to transportation.

Available online and in print, Cities100 provides stakeholders an accessible format to explore achievable solutions for climate action in cities, and will be a useful tool for relevant groups ranging from impact investors and development organizations, to mayors and city governments.  You can access the full Cities100 2015 publication online here.