29.06.23, LONDON, 3Ci – the Cities Commission for Climate Investment – has published today its new report advocating the case for a National Net Zero Neighbourhoods programme.

Developed by 3Ci with support from the Department for Energy Security and Net Zero, and the public and private sectors, this comprehensive report provides an outline business case for the delivery of Net Zero Neighbourhoods across the UK.

3Ci is a partnership between Connected Places Catapult, Core Cities UK, London Councils, Key Cities, Scottish Cities Alliance and supported by Department for Energy Security and Net Zero and the Local Government Association.

Net Zero Neighbourhoods is a new concept that integrates local net zero projects into attractive investment propositions by creating scale and long-term certainty for investors, thereby joining up the different types of assets that are important to decarbonisation. This includes transforming transportation, energy, housing and waste services in a coordinated way, using a blended finance model capable of attracting capital from banks, pension funds and other institutional investors. Importantly, 3Ci’s proposals include a programme of technical assistance and capacity building to ensure projects are of investment grade.

3Ci’s Net Zero Neighbourhood model has a special focus on residential retrofit, one of the biggest sources of emissions in the UK. Here, a core problem is that every neighbourhood has a different mix of housing types and tenures, which makes collective investments needed to decarbonise neighbouring homes difficult. Evidence shows it is also unlikely that most homeowners will pay toward retrofit, increasing the need for public subsidy.

But the new approach can address residential retrofit at no cost to the homeowner or tenant and reduce the need for public subsidy from around 70-80% to 35%. It does this by creating a revenue stream from energy savings over the long-term which is attractive to capital investors, blending their contributions with smaller amounts of public subsidy in an investment vehicle. The model also allows for a saving to be passed to the householder, or used to target fuel poverty, helping a just transition to net zero.

3Ci has calculated the cost of achieving local net zero at over £200 billion just for London and the 11 UK Core Cities – for the whole of the UK that figure is closer to £1 trillion, a figure way beyond the ability of public finances to address. Without bringing private capital into local net zero projects the UK will fail to meet its decarbonisation targets, and it is exactly this gap which 3Ci is designed to fill. 3Ci’s model aims to turn the cost of net zero into an opportunity, to bring significant additional investment, jobs and green growth to UK plc, delivering local environmental and health benefits, alongside community wealth-building.

Local authorities have projects which can deliver net zero and the investment community has demonstrated a growing interest in financing them, but too often these projects are not of investment grade. 3Ci’s approach therefore also offers technical assistance and capacity building to improve the standard of projects, alongside a platform to bring investors and project owners together.

Recognising these needs, opportunities and challenges, 3Ci’s new report makes the case for a multi-asset approach that avoids only cherry-picking projects that make the biggest returns, reduces the need for public subsidy and has no cost for the householder, improving the chances of community buy-in.

The report recommends a national programme of Net Zero Neighbourhood demonstrators to provide proof of concept, creating market and investor confidence.

Prof Greg Clark CBE, Chair of 3Ci and Connected Places Catapult, said: “The Net Zero Neighbourhood has several advantages over other methods of decarbonising places. It creates scale, certainty and an investable revenue stream, whilst building capacity for local authorities and enabling community buy in. Without the approach that 3Ci has developed, both within this model and its wider work, the UK will be far less likely to attract the capital needed to achieve its net zero ambitions.”

He adds that 3Ci has set up a Net Zero Investment Task Force of private investors, is creating a Net Zero Neighbourhood Community of Practice, and developing a ‘pitch-book’ of projects, bringing together places and projects that are either developing schemes which have some of the features of a Net Zero Neighbourhood, or have the ambition to do so.

“Nowhere yet has the ability to undertake a full Net Zero Neighbourhood project however, so our goal is to also set up full demonstrators capable of testing this model. The prize will be a major shift in investor appetite for net zero, shifting the market fundamentally toward this type of model, mitigating the existential threat of climate change whilst creating local jobs and other benefits. This is an area where the UK can be truly world leading, and we must now focus together on realising this opportunity.”

As a next step, 3Ci is seeking local authorities that are interested in working with them to develop demonstrators of the Net Zero Neighbourhoods concept. Local authorities have until 5^th July to register their interest.

3Ci is looking for projects to be included in a new National Net Zero Neighbourhoods Programme, which will support and raise the profile of pilot schemes looking for local investment. This is a non-competitive process.

Net Zero Neighbourhoods is a place-based concept developed by 3Ci which aims to increase local prosperity through enhanced growth in green businesses and access to associated jobs. It also looks to create vibrant and cohesive communities through engagement and collaborative design, and enhance the attractiveness and quality of neighbourhoods.

Further information regarding submitting proposals for a Net Zero Neighbourhood will be provided in a workshop on Wednesday 5 July at 9.30am

Proposals accepted will be incorporated into a UK Net Zero Neighbourhood ‘pitchbook’ to be shared across Government departments and potential investors forming the basis of a potential first wave of a national programme, subject to funding being secured.

Successful schemes are set to be profiled and presented at COP28 in Dubai, as well as other national and international investment focused events. They will also be shared with the private finance community including institutional investors, investment banks and pension and sovereign wealth funds.

Proposals should form part of an existing or planned redevelopment scheme and local authorities are invited to submit single proposals that will contribute towards proving the concept of the Net Zero Neighbourhood model.

Proposals should:

• Demonstrate understanding of the place-based Net Zero Neighbourhood model and how it could be applied within the proposal
• Include a description and identification of location, including information on building type and mix (e.g. residential, office, leisure), physical infrastructure (including mobility and energy), diversity of the neighbourhood, green and blue space.
• Provide evidence of political support at a senior level
• Identify any secured or potential funding which might contribute towards the design or delivery of the programme.
• Describe the diversity and socio-economic mix of the communities within the proposed neighbourhood

Registration of Interest

Please register your interest by submitting the name of the local authority and a contact person to Helena.Downey@cp.catapult.org.uk

You will then receive a confirmation email, an invitation to join the webinar and a copy of the Executive Summary of our Outline Business Case for Net Zero Neighbourhoods.

Interested authorities will then be invited to submit a short application by 8 September 2023.