Lorna Pimlott, local authority managing director at the UK Infrastructure Bank (UKIB), puts the case for how a portfolio approach to packaging smaller net zero investments could be key for many local authorities to drive forward their ambitions.
Lorna Pimlott
To reach net zero we have to make associated financing mechanisms viable for all parties. That’s as true for local authorities as any other sector.
Councils across the country have set ambitious targets for local infrastructure investment to drive forward net zero and boost long-term local economic growth. Yet, in such a difficult economic climate, financing this transition in a way that is affordable and proportionate to other demands is increasingly challenging.
Many councils, in particular smaller authorities, don’t have deep pockets and have limited resources to deliver projects at scale, while also facing competing priorities for net zero projects. Furthermore, there are many investment barriers that limit the take up of decarbonisation measures, such as high up-front costs and long payback periods.
This is especially true for smaller interventions, such as building retrofit and decarbonisation, solar installations, and EV fleet upgrades. Individually, these measures are less financeable and typically struggle to attract external investment. However, packaging them together can make the projects viable, attractive for finance, and a mechanism to deliver significant carbon savings on a council’s own operations.
When budgets are squeezed and councils across the country are faced with an issue as transformative and wide-reaching as achieving net zero, working collaboratively and sharing ideas can be key to making meaningful progress. After all, a problem shared is a problem halved.
Today, we announce support for West Suffolk Council through a £17m loan facility for its innovative net zero fund, which offers a replicable model for other authorities to package together their net zero projects into one investible proposition.
The fund will enable West Suffolk to deliver a number of smaller interventions that are key to delivering net zero but would otherwise fall below UKIB’s £5m minimum ticket size for local authorities. This includes delivering building decarbonisation, solar installations, and EV fleet upgrades in a way that is both financially sustainable and environmentally impactful.
This model leverages net income from West Suffolk’s Solar for Business scheme to support the other less profitable or cost-neutral initiatives, with close collaboration from the council’s projects delivery and finance teams. Ultimately, this is what will drive forward the performance of the fund, makes the proposition investible and will enable the fund to be delivered on at least a cost neutral basis for the council.
West Suffolk has been successfully operating the Solar for Business scheme since 2012, and for those reading on with interest, establishing a similar scheme might seem like the greatest hurdle.
It is true that many authorities are at different stages on their journey to reaching net zero. For some, this won’t be the right solution, and, for others, it will be too soon to consider. Wherever an authority is on their journey, UKIB offers an impartial commercial and financial advisory service at no charge, which can help councils to understand and navigate the challenges and financing barriers they face in delivering critical infrastructure or establishing an investible net zero proposition. And for those ready to discuss how our lending could support their net zero projects, UKIB offers the lowest cost of finance available at Gilts +40bps with a loan facility shaped to match the requirements of the projects.
UKIB can play a critical role in supporting local government to create investible, deliverable projects which generate impact. Models such as the one developed with West Suffolk offer a blueprint for local authorities across the UK to deliver this change.
Lorna Pimlott is local authority managing director at UKIB.
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