The UK’s Local Climate Bond market has received a £16m injection from two private investors, in a significant boost to local authority-led net-zero initiatives.
The Green Finance Institute (GFI) confirmed on 7 May that the Esmée Fairbairn Foundation and Unity Trust Bank have committed £1m and £15m respectively to support municipal green investment projects.
The foundation’s £1m will be used as match-funding to encourage citizen investment through the Abundance Investment platform. The first £165,000 of this funding has already been deployed to support green projects in Bristol, Hackney and Hammersmith & Fulham.
Meanwhile, Unity Trust Bank becomes the first institutional backer of the initiative with a £15m commitment. The funds will be co-invested alongside resident contributions to finance projects such as school energy retrofits, flood resilience schemes, and green infrastructure.
GFI and Abundance Investment have worked in partnership to establish the local municipal investment model, enabling councils to borrow directly from citizens and institutions to fund local climate action.
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So far, 14 councils have used the platform, raising £11.5m from more than 2,750 citizen investors. The new institutional backing is seen as a key milestone in scaling the market, with GFI hailing it as a “pivotal moment” for the asset class.
Councillors from the participating boroughs welcomed the news, highlighting the benefits of combining grassroots and institutional investment to drive low-carbon projects and community wealth-building.
Local authorities in the UK are tasked with delivering a range of services, ranging from education over transport to waste collection and disposal. The UK government estimates that 82% of all greenhouse gas emissions fall within the scope of local authorities.
Yet local governments are facing mounting costs pressures having faced more than a decade of budget cuts. They are now increasingly turning to alternative financing options amid concerns about the adequacy of central government support to meet net-zero targets. A recent survey by the Local Government Association found that over two-thirds of councils lack confidence in achieving net-zero under current funding arrangements.
