In this thought piece, Polly Billington, the founder and CEO of UK100, the only network of climate ambitious local authorities in the UK, tells us how local leaders and UK Infrastructure Bank can work together to unlock local net zero.
Six months on from the UK hosting the world’s most influential climate conference, COP26 Glasgow, the urgency of climate action has only become more acute.
Because it’s cheaper, and home generated, renewable energy can help tackle the cost of living crisis driven by spiralling energy costs set against a devastating war in Ukraine and the need to end our dependence on Russian oil and gas.
Politicians who refuse to accept or understand the benefits of climate action to meet the pressing immediate crises of energy costs and security will fail the voters and the country. Getting to Net Zero emissions won’t just protect against future climate catastrophe in the long term but will drive down energy bills, boost energy independence and drive economic growth now — if delivered right.
Acting local
Amidst these multiple crises, UK voters will go to the polls to elect their local representatives next month. And with local authorities the most trusted to deliver climate action, constituents will have the option to support local Net Zero leadership.
But it’s not just support from voters that local leaders need, they need Government support to deliver the innovative and ambitious energy, transport, planning and energy efficiency policies vital to achieving Net Zero.
With spending on local government falling by more than a fifth since 2010, support often means cash, but not always. Check out our report on the devolved powers local authorities also need. Even where it is cash that’s necessary, it doesn’t always have to come from the taxpayers’ pocket.
UK Infrastructure Bank
In fact, back in 2020, UK100 worked with our members to produce an Accelerating the Rate of Investment in Local Energy Projects report that identified the scale of private investment that local authorities could unlock with the help of targeted public investment through what we called a Net Zero Development Bank.
The Government didn’t love the name, but they did embrace the idea. And in 2021, we were delighted to welcome the launch of the new UK Infrastructure Bank (UKIB). The bank was set up with a dual focus to tackle climate change while supporting regional and local economic growth.
Specifically, the HM Treasury Policy Design brief confirmed defined UKIB’s purpose as:
- Lending to local and mayoral authorities to support their ambitions in delivering local projects;
- Support local authorities as a central element of its objectives on Net Zero and levelling up;
- Allocating £4bn of its initial £12 billion of equity and debt capital to local authority lending;
- Developing an advisory service for local authorities and other project sponsors to support project development.
Or as John Flint, UKIB’s inaugural CEO, puts it: “The Bank is a unique institution with a mandate to tackle two pressing intergenerational challenges — the transition to Net Zero and supporting local growth across the UK.
“Of course, the local government sector is central to both those missions, so I am pleased the Chancellor gave the Bank a specific mandate to work in partnership with authorities to deliver their priority projects through providing efficient finance and advice.”
Writing for UK100, John points to partnerships with the Tees Valley Combined Authority and West Midlands Combined Authority that are already fulfilling UKIB’s mandate.
The first deal for the Bank was lending £107m to the Tees Valley Combined Authority to support the redevelopment of South Bank Quay. The quay is a critical piece of enabling infrastructure that will support meeting the UK’s ambitious offshore wind targets and create local jobs as part of the wider redevelopment of the area.
And last month, UKIB was able to finance the West Midlands Combined Authority’s development of green bus routes in Birmingham, helping people get to work more quickly, more easily and with less impact on the environment.
But there is more potential to be unlocked. And to help UKIB work more closely with local authorities, UK100 convened a series of workshops and a roundtable event to allow local leaders to speak directly about their hopes for the bank as a critical partner along the road to Net Zero.
What do local authorities want?
UK100 members are clear that while £4bn of low-cost funding is vital, they would like to see UKIB develop a range of much more innovative financing solutions.
Solutions that could include products such as loans with interest rates linked to environmental, social and governance (ESG) performance, financial guarantees and first loss support schemes to unlock private investment. Facilitating access to capital markets at an early stage in project development would also be welcome.
Local leaders want to work alongside UKIB to develop financing aggregation approaches to help reduce the cost of borrowing. And they want support in developing business models and mechanisms that will help local authorities commercialise their investments and generate appropriate revenue streams to support the required funding.
They would also welcome UKIB as a co-investor, providing debt and equity alongside their own investment.
Alongside finance, local authorities see an important role for the UKIB in providing project development support. The UKIB should become a centre of project development and financing excellence, with a capacity to provide critical friend support throughout the project development process.
However, UKIB support for project development needs to go beyond simply being a critical friend. It needs to develop financing approaches that enable local authorities to have the technical and commercial resources they need to turn their conceptual investment opportunities into investable projects.
UKIB also has a crucial role, with its market-facing mandate, in understanding the marketplace barriers to accelerating Net Zero investment and feeding back to the Government on how its wide range of local Net Zero policies should be aligned and developed to maximise the pace of such investment (including subsidy support, regulatory environment and other relevant policies designed to accelerate investment).
The key is listening to local authorities
As John puts it: “access to appropriately structured finance can be part of, though never the entirety of, the solution … I am optimistic that by working in partnership and challenging one another we can make a real difference. Doing things the way they have always been done will not deliver the change we need.”
Ultimately, it’s clear that, in the face of multiple crises, the time is now to work together on innovative and ambitious climate and energy solutions that can be delivered locally — without making a huge dent in taxpayers’ pockets.
And UKIB will be a key tool — as long as it continues to listen to and work closely with the local leaders Brits are entrusting to deliver on Net Zero.
After all, local action is the cornerstone of the global promises made at COP26.
Polly is a campaigning and communications specialist with extensive experience in media, government and politics.
A former broadcast journalist (BBC 1993-2007), she was a special adviser at the Department of Energy and Climate Change under Ed Miliband (2008-10), Director of Communications for Sadiq Khan’s London Mayoral candidate campaign (2015), and Head of Communications and Campaigns at Citizens Advice (2013-15).
In 2022, Polly was named among the 100 most influential Women in Westminster and shortlisted for the BusinessGreen Leader of the Year award.
