The fund’s GBP 102 million (USD 135 million)11 investments are predicted to save 288,805 tonnes of GHG per annum and to divert 440,980 tonnes of waste from landfill per annum, resulting in the creation of 2000 jobs and 34% energy use savings. Through two of its three Urban Development Funds, the fund managed to secure GBP 575 million (USD 761 million) from the private sector and other investors. 

London aims to reduce GHG emissions by 60% below 1990 levels by 2025. To achieve this goal, the city has developed a number of strategies and programmes related to energy efficiency, energy supply, waste, low carbon economy and adaptation (e.g. RE:FIT12, RE:NEW, London Waste and Recycling Board13). The London Green Fund (LGF) was established in 2009 and provides a useful tool to ensure that the city’s priority programmes and projects benefit from additional financial support from the private sector. 

The LGF is a JESSICA14 Holding Fund of GBP 120 million (USD 159 million) and is managed by the European Investment Bank (EIB). It is made up of GBP 60 million (USD 79 million) from London European Regional Development Fund (ERDF) Programme, GBP 32 million (USD 42 million) from the Greater London Authority15, GBP 18 million (USD 24 million) from the London Waste and Recycling Board16, and GBP 10 million (USD 13 million) from private funding at project level. 

Value: The LGF was established with an initial value of GBP 100 million (USD 132 million), and grew with the addition of GBP 575 million (USD 761 million) of funding from the private sector and European Investment Bank (EIB). 

The LGF (FEF and LEEF in particular) has managed to secure additional streams of funding from private sources at both fund level and project level. This plays a key role in supporting the sustainability of the fund. FEF secures a minimum of GBP 25 million (USD 33 million) at fund level from the private sector, including Pension Funds, and GBP 33 million (USD 44 million) at project level from other investors. 

LEEF secures GBP 50 million (USD 66 million) from the private sector (Royal Bank of Scotland) at fund level, and an additional GBP 284 million (USD 376 million) from other investors. The GSHF has also received GBP 200 million (USD 265 million) from the EIB in 2012 to develop energy efficient social housing. It would have been difficult to leverage additional private sector finance if a grant model had been used. Having used this structure, the fund is expected to show a significant leveraging effect (15x times the initial investment by the Greater London Authority). 

Structure: The LGF has a revolving fund structure made up of three smaller funds, each targeting different projects. The EIB manages the LGF on behalf of the Greater London.

Authority and the London Waste and Recycling Board. Their main responsibilities are to hold the initial capital, any proceeds from investments, and interest earned from capital that has not been invested. The EIB is also responsible for setting up and selecting the organisations to manage the Urban Development Funds and to monitor their performances. 

The LGF focuses on waste management, decentralised energy and energy efficiency schemes that support the Mayor’s environmental targets, with a particular focus on reducing GHG emissions. The fund allocates funding to three Urban Development Funds, which are separate legal entities and invest directly in projects: 

Foresight Environmental Fund17 (FEF) 

Launched in March 2011, FEF provides equity finance or equity-type investments for the construction or expansion of waste to energy facilities, re-use, recycling or reprocessing facilities, and other facilities displacing fossil fuels such as ‘waste to fuel’. 

London Energy Efficiency Fund18 (LEEF) 

Established in August 2011, LEEF mainly provides debt finance to private and public sector building retrofit projects and to decentralised energy schemes and associated distribution systems. LEEF has provided debt financing to support energy efficiency measures in 72 buildings. Equity finance is also available, subject to project financing structure. 

The LEEF can lend money to different parties, including public, private sector or joint venture entities such as Energy Service Companies. A condition of the loan is that the projects must involve eligible works to public sector owned or occupied buildings. Borrowers can take up to GBP 20 million (USD 26 million) with no set payback period and each project must deliver energy savings of at least 20%. 

Greener Social Housing Fund (GSHF) 

Since March 2013, the GSHF has been providing investments mainly in the form of loans to landlords of social housing for retrofitting works. GSHF has invested in three Registered Providers of social housing - Gallions Housing Association, The Origin and A2Dominion - to support the refurbishment of over 2,500 properties to make them more environmentally friendly. 

The Funds are independently managed by professional fund managers that make repayable investments in projects. They make decisions on projects in which to invest, based on the investment policy agreed by the Investment Board. 

  • Foresight Group LLP manages the FEF. 
  • Housing Finance Corporation Limited (THFC) manages the GSHF. 
  • Amber Green Consortium administers the LEEF, with funding from RBS and technical support from Arup. All projects have to receive approval from the Greater London Authority. 



The LGF has invested GBP 102 million (USD 135 million) in 18 projects so far. As of November 2014, they are predicted to save 288,805 tonnes of GHG per annum and to divert 440,980 tonnes of waste from landfill per annum, resulting in the creation of 2000 jobs, 34% energy use savings and 61 MW of energy generated. The returns will be reinvested in similar activities, generating an even higher impact. 


Reasons for success 

  • Different factors may prevent low carbon projects from being financed (e.g. difficulties accessing finance, lack of or limited finance, high project costs and risks). Understanding why projects are not going ahead is a critical first step for cities. LGF used this knowledge to formulate their goals, their investment strategy including where they wanted to invest, which funds and projects they wanted to support, how investors can work with them, and how they could set up the structure of the fund to give confidence to investors. 
  • While having a clear investment strategy is key, city funds should be flexible and acknowledge that the market can and often does change. In London’s case, the LEEF had to allocate fewer resources to decentralised energy schemes and more resources to retrofitting, as the programme to develop the pipeline of decentralised energy projects lost its funding. 
  • To ensure that low carbon projects are implemented successfully, borrowers may often need project management and technical guidance, in addition to financial support. This is the case especially for public sector borrowers. Wary of this challenge, the LGF coordinated resources internally with the RE:FIT and RE:NEW teams. These teams provided support to local authorities that wanted to retrofit but did not know where to start.
  • City funds should identify potential challenges (e.g. legislative barriers, tax implications for operating a fund) and act on opportunities (e.g. working with existing organisations). For instance, the LGF has worked with the Green Investment Bank to identify opportunities and projects that they could finance together. 
  • Professional fund managers should be recruited based on their ability to attract private capital. 


When/Why a city might apply an approach like this 

London’s approach has successfully leveraged private sector investment and supported the fund’s financial sustainability, enabling finance to be reinvested in similar activities. Cities could look to this model to secure additional funding at both the fund and project level.


C40 Good Practice Guides

C40's Good Practice Guides offer mayors and urban policymakers roadmaps for tackling climate change, reducing climate risk and encouraging sustainable urban development. With 100 case studies taken from cities of every size, geography and stage of development around the world, the Good Practice Guides provide tangible examples of climate solutions that other cities can learn from. 

The City Climate Funds Good Practice Guide is available for download here. The full collection of C40 Good Practice Guides is available for download here.  

All references can be found in the full guide.