Making local authorities the driving force behind a greener future

Rhian Mari Thomas and Adele Gritten explain why bridging the local delivery gap will mobilise national net zero investment.

Devolution is back on the new administration’s agenda. Mayors and council leaders are set to play a more pivotal role in delivering services, with integrated settlements allowing local areas to focus on their own key priorities. 

The net zero agenda, at face value, lays more challenge and responsibility at the door of local authorities but without solving their financial and capacity gaps. There are, though, reasons to think that this dynamic can create new opportunities both to attract investment into key net zero projects in communities and rebuild local government capability.

We must create a UK-wide local investment advisory service for local leaders to access support and advice on project development, at a level commensurate with in-house skill and capacity

Firstly, while the public finance position is challenging, there is still capital available. Both the National Wealth Fund (NWF) and Great British Energy are designed to inject investment into clean energy and infrastructure projects across the country. The NWF has a local advisory and lending arm with £4bn to deploy, and a mandate to act as project sponsor to crowd-in private investment and invest where there is limited market provision. A shift to the new fiscal accounting based on Public Sector Net Financial Liabilities creates further headroom as assets are now scored alongside liabilities encouraging more public investment. This in turn will create opportunities for domestic pension schemes as well as for global capital, which may come to see the UK as an increasingly attractive destination for green investment.

Secondly, there is certainly demand. The UK’s ambitious Local Growth and Power Plans aim to place regional mayors, local authorities and communities at the heart of the nation’s energy transformation. However, while access to finance is a precondition of success, it is insufficient alone if the projects aren’t there to finance. Across the UK, local leaders are struggling to turn local clean energy and wider net zero ambitions into a reality. Funding from central Government is mainly for project delivery (not development) and tends to be a complex landscape to navigate, which is resulting in higher transaction costs, slower project development and inequitable access across local authorities with different resources.  

So high-level, generic demand for investment must be turned into viable, bankable projects that attract low-cost tailored capital. The question is how best to support local authorities to generate this? 

We have supply and we have demand – the gap is one of delivery. We must create a UK-wide local investment advisory service for local leaders to access support and advice on project development, at a level commensurate with in-house skill and capacity. Designed well, and integrated into the public finance landscape, such a service promises — from deal origination to funding — to increase the pipeline of viable projects and attracting finance for projects that deliver both economic and public policy benefits.

Early testing of this concept indicates that at the right scale and accessibility, it would be indispensable to local leaders; a one-stop-shop that provides scalable and replicable support to local area needs.

This proposed Service builds on the existing efforts such as the Net Zero Accelerator Programme and pioneering work done in Bristol through their City Leap programme. This will ensure continuity in policy development through creating a playbook of successful projects that can be replicated nationwide. 

The stakes are high. If we fail to act, local authorities will remain hamstrung by a lack of resources and expertise, unable to participate fully in the nation’s energy transition, and opportunities to engage the wider community with the energy transition will be lost. But with the right support, they can be the driving force behind a greener, more prosperous future for all.

Rhian Mari Thomas is CEO, Green Finance Institute and Adele Gritten, is CEO, Local Partnerships