New Perspectives on Climate Finance for Cities report: Case Study
Investing in London’s energy and waste infrastructure
The London Green Fund was developed under the European Commission’s JESSICA initiative (Joint European Support for Sustainable Investment in City Areas) which allowed European regions to use a portion of EU grant funding to make repayable investments in projects, thereby creating a revolving investment fund for the regeneration of urban areas. The London Green Fund is a Holding Fund, managed by the European Investment Bank and is made up of £50 million from the European Regional Development Funds and £50 million in match funding from the Mayor of London and the London Waste and Recycling Board (LWaRB). The Fund provides equity, loans or guarantees to projects at an early stage of their development or construction phase where project risks are higher, to encourage further commercial investments in environmental projects of this nature. It supports projects in line with the priorities of the Mayor’s strategies. The London Green Fund is in a position to take a longer-term view of the scale and timing of financial returns expected from their investments than the commercial markets, particularly in the current economic environment.
The Fund consists of three Urban Development Funds
- Waste – £35 million financing via equity or guarantees in waste to energy, reuse, recycling or reprocessing facilities
- Energy efficiency – £60 million primarily debt financing (and equity where appropriate) to retrofitting and decentralized energy projects in existing public, private and voluntary sector estates. This has been matched by up to £50 million of funding from Royal Bank of Scotland
- Greener Social Housing – £12 million in the refurbishment of social housing. Investment is in the form of loans to social housing providers
The London Green Fund has effectively used public sector funding to attract private sector funds into city priority projects. As the Funding is in the form of loans, equity or guarantees it is revolving, so it can be reinvested into other projects in the future. The UDFs are managed by reputable external fund managers to ensure projects are fully analyzed from both a financial and environmental perspective prior to investment. The process allows the Mayor to determine the strategic objectives for the fund and its investment criteria whilst the independent fund manager ensures that the fund is focused on investment and delivery. As of June 2015, the London Green Fund had invested £97 million in 16 projects valuing approximately £700 million.