Collective Leadership to Unlock Place-Based Net Zero Investment 

The Net Zero future to which we are committed cannot happen without mobilising the finance we need to achieve it. If we cannot make the investment case, the work will not take place. Here in the UK, we know the investment need runs to perhaps £2trillionⁱ just for local Net Zero (local energy and waste, domestic and commercial retrofit, local transport), way beyond the ability of the public purse. 

So, our collective task must be to create models capable of paying back capital whilst reducing emissions, also delivering a return in jobs, local growth and health. This has the added benefit of changing the debate on Net Zero, framing the challenge as one of investment and economic opportunity, rather than cost.  

This is the mission of 3Ci, its public and private sector stakeholders, and precisely the conversation that our recent joint event during London Climate Action Week facilitated, with the objective of informing the new Government’s policy. Bringing together practitioners across the finance sector and local government, we challenged them to get down into the detail of exactly what will make this work. The immense talent in the room rose to this challenge, and the results were fascinating. 

Top of the list was a more robust National Net Zero Framework, complementing the work of the Climate Change Committee by building bottom-up by local areas and sectors with targets and timelines, for example for emissions, energy use, and gas boiler phase-out. National approaches to Net Zero governance should back this by seeking to involve local political leadership and the private sector from the outset, to accelerate progress. 

Increasing local capacity is a major issue, and discussion acknowledged the extreme constraints and challenges faced by local authorities. Therefore, understanding the resources and powers local authorities will need is vital, linking this to the Government’s English Devolution Bill and working through what might be needed by localities in Devolved Administrations. Simplifying funding will help, encouraging collaboration not just competition, enabling aggregation of funds and schemes alongside enhanced borrowing powers. 

Participants backed the need for Net Zero Neighbourhood Demonstrators to be accelerated as a route to unlocking major private capital, acknowledging that there are many already on the starting blocks and progress could be quickly made. 

Understanding how to scale up delivery from these and other pilots is key, including: clear ministerial leadership; skills development including a comprehensive technical assistance programme for local authorities; and supply chain development, where we have a significant hill to climb, and which is reliant on strong national policy signals to the market. This could be aided by statutory instruments and duties for relevant agencies to uphold the legal commitment to 2050. 

Innovative approaches to procurement will fundamentally shift the dial, respecting transparency and diligence whilst being less risk averse. Bringing public and private sector together earlier in the process, enabling strategic partnerships and increased use of frameworks to fast-track delivery. 

Investment relies on recognising the importance of community engagement as part of the planning process; without buy in, finance cannot flow. Local authorities have a key role as planning authorities and community conveners, as do new methods of communication including digital. Understanding what matters to people in their own terms is key; the term ‘Net Zero’ might have technical connotations whereas lower bills, local jobs and improved community facilities could cut-through and drive action. 

Older properties are a major source of emissions, but to avoid continually correcting the mistakes of the past a joined-up strategy for newbuild and retrofit is needed. And retrofit itself should be joined up with other interventions, for example dealing with mould or fire safety in social housing, so any disruption only happens once, not people tramping in an out for weeks. 

‘Don’t reinvent the wheel’ and understand what innovation is already out there was a key message from participants, that we simply need to get better at sharing this actively, not only putting examples out passively. The private sector also has access to international examples of best practice and financial innovation which could provide insights for the UK. 3Ci offers a mechanism to help with this, as do existing Government initiatives like Net Zero Go. 

Government and its agencies have an opportunity to accelerate progress in this vital area, not just through the injection of more cash, but by realigning existing resources and policy, creating certainty and market confidence to leverage private capital. Additional to the above, this might include: underwriting early project risk, for example through guarantees; updating Green Book guidance; fiscal incentives for Net Zero progress and fossil fuel reduction; and linking Net Zero to national strategies for industry, health, skills and employment – for example ensuring a supply of skilled labour to undertake work, alongside industrial innovation to accelerate progress. 

This event ended with the conclusion that, although there is much the new Government can do to access potentially hundreds of £billions for Net Zero, it cannot do it alone. A multi-level, local-national, cross-sector approach is essential from the outset, and must be reflected in governance and the development of policy. These ideas complement the findings of 3Ci’s recent Investor Taskforce, led by Catherine McGuinness CBE, and its final report From Challenge to Opportunity: Unlocking a UK-wide Net Zero Investment Dividend.   

We have had many good debates on these issues which floated many ideas in the past. So what, one might ask, is different about now? It’s not just that there is a new Government, or the growing recognition that we are running out of time to meet climate challenges. It is the combination of in-depth, worked up investment models alongside the collective commitment of localities with plans and investors with capital to get to the next stage. This discussion was, overall, a call to solid action.  

We see this as a massive opportunity, but do not underestimate the task ahead. It requires an unparalleled collective act of leadership and radical collaboration. The partners from this event are ready to provide step up, and Government has a clear, ready-made opportunity to help us deliver this shared ambition.  

UKREiiF, now in its third year, has firmly established itself as the premier UK event for real estate investment. It’s a far cry from Cannes, of course, but arguably it’s more real with a greater focus on place. The barges in and around the Royal Armouries aren’t quite the billionaire yachts of the Mediterranean, but they’re more colourful and reflect an industrial history from which we are still learning lessons.

The Need for a New Green Industrial Revolution

One of those lessons is about a new green industrial revolution. Unlike its 19th-century counterpart, the effects and impacts need to be better managed in a way that creates jobs and business growth, builds more sustainable and resilient communities, and drives investment in infrastructure and technology. This modern revolution prioritises environmental sustainability alongside economic progress, ensuring that the growth we achieve today does not compromise the well-being of future generations.

3Ci’s Role at UKREiiF

It’s refreshing, therefore, that Net Zero and the environment continue to be central to the UKREiiF agenda. Taking advantage of this, 3Ci (Cities Commission for Climate Investment) contributed to a range of panels and showcased its activities within the CPC pavilion on Wednesday afternoon.

Highlighting Key Panels and Discussions

One of the standout moments was a stellar panel chaired by Catherine McGuinness CBE, which delved into the recommendations from her Net Zero Investment Task Force. The findings from this task force, released in the House of Lords back in February, emphasise the critical role of cities in driving the net zero agenda. The panel featured prominent city leaders such as Tracy Brabin, Mayor of West Yorkshire, and Susan Aitken, Leader of Glasgow. Both, huge advocates of 3Ci, were clear that the biggest impediment to their cities securing the transition focused on the skills needed to bring investable propositions forward for private sector investment.

Engaging Investors with Dragon’s Den Style Events

Following this insightful panel, 3Ci hosted two “Dragon’s Den” style events where cities presented their Net Zero Neighbourhoods projects to a panel of investors. Cities like Leeds, Sheffield, Glasgow, and Hounslow showcased their innovative plans, aiming to create sustainable and resilient urban areas. The investors, or “dragons,” responded enthusiastically, expressing interest in further discussions at the upcoming London Climate Action Week. This event, scheduled for the end of June, will see 3Ci collaborating with NatWest on a city investment event, fostering deeper connections and potential investments. Enabling place-Based Net Zero Event

Winning the Sustainability Award

From a ‘walk the talk’ perspective, I was happy to see that the CPC pavilion was given a Sustainability Champion Award at UKREiiF! Our pavilion was celebrated for its innovative practices, which include designing reusable exhibition stands to minimise waste, using digital tools to replace traditional paper-based materials, employing local materials and suppliers to reduce carbon footprints, and implementing energy-efficient technologies and renewable energy sources. This accolade is a testament to our dedication to sustainable practices and innovation, setting a new standard for sustainability at large-scale events.

As I headed home on the train, mulling over the whirlwind of the past three days, the conversations from various panels and pavilions stuck with me. The overwhelming positivity resonates deeply, but with a resolute focus on action and moving forward. It’s clear that the collective effort of the entire team has been monumental, and I am immensely proud to be part of such a dedicated group. Together, we are not just part of an event; we are driving meaningful change and shaping the future we envision.

Tracing the trajectory of 3Ci reveals a journey marked by organic growth and collective ambition, rooted in a shared vision of sustainable urban development. 

From modest beginnings, 3Ci has cultivated strategic partnerships with influential entities like the M10 Leadership Group, Scottish Cities Alliance, and Key Cities, fostering a culture of collaboration and shared purpose. 

With quiet determination, 3Ci emerged onto the global stage, making its presence felt at prestigious events such as COP26, COP27, and COP28. Amidst the clamor of these gatherings, 3Ci effectively championed the cause of sustainability and climate action. 

Fueling progress through impactful initiatives, 3Ci orchestrated a series of regional investment events, which laid the groundwork for transformative projects that resonate with communities across the UK. 

Through its insightful reports and practical guidance, 3Ci has empowered local authorities and stakeholders, equipping them with the tools and knowledge needed to navigate the complexities of sustainable urban development. 

Amidst this journey, 3Ci’s commitment to catalysing change remains steadfast, reflected in initiatives like the National Net Zero Project Pipeline and the 3Ci Net Zero Investment Taskforce. These initiatives effectively drive innovation and investment towards a more sustainable future. 

As 3Ci continues to grow and evolve, its resolute dedication to fostering sustainable urban development inspires communities and stakeholders to join hands in building a better tomorrow, one step at a time. We will focus on positioning UK cities and regions at the forefront of global initiatives to secure essential funding for achieving Net Zero. 

Our Mission: Supporting Local Authorities in Achieving Net Zero 

At the heart of 3Ci’s journey lies a profound mission: to support local authorities in securing the necessary long-term finance for achieving net zero. Our place-based experience and ability to convene government and financial institutions make us perfectly placed to help deliver that investment. By fostering collaboration among public and private stakeholders, we aim to surmount obstacles related to finance, scale, and capacity. Our goal is to cultivate an environment conducive to directing private investment into cities and regions, thereby accelerating progress towards Net Zero. 

Advancing Financial Models through the Net Zero Neighbourhood Pipeline 

Furthermore, in line with our mission, 3Ci is shifting its focus towards developing specific projects in the Net Zero Neighbourhood Pipeline and advancing the financial models that will evolve through this endeavor. This strategic move underscores our commitment to translating discussions into concrete actions, driving tangible progress towards a sustainable future. As we embark on this next phase of our journey, 3Ci remains steadfast in its commitment to championing change, fostering collaboration, and driving sustainable urban development across the UK and beyond. Join us in shaping a future where sustainability is not just a goal but a reality for generations to come. 

3Ci’s Net Zero Investment Taskforce, Comprising Finance Industry Leaders, launch a New Report into ‘Net Zero Neighbourhoods’ at the House of Lords.
Report finds support for large-scale private sector investment in Net-Zero Neighbourhoods.

19.03.24, LONDON, 3Ci – The Cities Commission for Climate Investment – has today published the initial findings and recommendations of its Net Zero Investment Taskforce. The report, titled ‘From Challenge to Opportunity: Unlocking a UK-wide Net Zero Investment Dividend’, was unveiled at an event in the House of Lords.

The Taskforce, comprising a diverse array of stakeholders from banking, insurance, pensions, venture capital, and ESG investment sectors, was convened to examine 3Ci’s innovative financing model for Net Zero Neighbourhoods, with a primary focus on unlocking funding for housing retrofit initiatives.

The Net Zero Neighbourhoods concept takes a multi asset approach to neighbourhood decarbonisation operating across domestic and commercial property retrofit; renewable energy; transport; and waste. The model uses a share of returns from high-yield assets, like energy, to pump-prime low-performing ones, like retrofit and waste, potentially captured in a single financial vehicle. The model aims to reduce the need for the scale of public subsidy required for retrofit whilst delivering interventions at no additional upfront cost to the homeowner or tenant – a potential game-changer.

The Taskforce highlighted that strategic public investment can leverage private finance. They suggest further consideration should be given to integrating existing and future public investment with private finance, including grant funding. From an investor perspective, major patient investors like pension and insurance companies, whose capital is in some ways most suited to retrofit, are attracted to very large-scale projects, the likes of which most current schemes cannot achieve. Creating scale across multiple programmes and geographies could unlock this capital.

The much sought-after solution to retrofit financing of crowding-in higher levels of private investment could therefore be realised through the ‘Net Zero Neighbourhoods’ model. Investors agreed that local authorities must play a central role in Net Zero Neighbourhoods by linking to area regeneration plans and services, supporting local jobs and economic growth.

Catherine McGuinness CBE, Chair of the 3Ci Net Zero Investment Taskforce and Non-Executive Director at Connected Places Catapult, said:

“Our findings reaffirm that decarbonising neighbourhoods at scale is not straightforward. Whilst our aim may be to retrofit homes, we are also trying to retrofit a financial system and its models to a purpose for which they were not created. A rapid evolution is required, creating an investment ecosystem that will help the market to adapt and new models to emerge.” 

Prof Greg Clark CBE, Chair of 3Ci and Connected places Catapult said:

“3Ci has a vital mission to enable the urban investment required in delivering the UK’s ambitious net zero commitment, city by city, and neighbourhood by neighbourhood. I am grateful to Catherine and the members of this taskforce for taking such a diligent view of the current opportunities and challenges to invest in retrofit at scale, and how we can address them.”   

The Taskforce’s recommendations include the following:
Activate Retrofit Demonstrators as a top priority: a series of demonstrators are needed to address the challenges highlighted by this Taskforce, considering how they can also enable a Just Transition through financing models and identify the key project elements/players that need to be on board.

Convene a UK-wide conversation, starting with a Net Zero Investment Summit: with a commitment to a structured 2–3-year dialogue, steered by a collective of place leadership, investors and politicians from the Devolved Administrations as well as the UK government, alongside the many agencies delivering excellent work in this space to cohere findings and efforts.

A stronger enabling environment should be built for net zero investment, including further clarity of national intent for local net zero policy to establish market confidence.  For example, delivery cannot happen without a stronger supply chain, which relies on such confidence.

Taskforce members:
Association of British Insurers
Investment Delivery Forum
City of London Corporation
Barclays
Big Society Capital
Building Societies Association

British Property Federation

British Private Equity & Venture Capital Association (BVCA)

HSBC

Impact Investing Institute

Institute of Chartered Accountants in England and Wales (ICAEW)

Legal & General (L&G)

Local Government Association (LGA)

Lloyds Banking Group

NatWest

Scottish National Investment Bank (SNIB)

United Kingdom Infrastructure Bank (UKIB)

UK Finance

-ENDS- Notes to editors Media contact: Alex Smith, PR and Marcomms Manager, Connected Places Catapult alex.smith@cp.catapult.org.uk +44 (0) 7741 195398 Any conclusions drawn in this report are those of 3Ci alone.  

About 3Ci

3Ci – Cities Commission for Climate Investment (formerly known as UKCCIC) – 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. Our aim is to ensure that urban investment plays a key role in delivering the UK’s ambitious net zero commitment, city by city and neighbourhood by neighbourhood. Our initiatives bring together business, finance and local communities to accelerate change through innovation that is fair to all. Alongside this, we are supporting local authorities to secure the necessary long-term finance to achieve net zero.   3ci.org.uk

About Connected Places Catapult

Connected Places Catapult is the UK’s innovation accelerator for cities, transport, and place leadership. We provide impartial ‘innovation as a service’ for public bodies, businesses, and infrastructure providers to catalyse step-change improvements in the way people live, work and travel.  We connect businesses and public sector leaders to cutting-edge research to spark innovation and grow new markets. We run technology demonstrators and SME accelerators to scale new solutions that drive growth, spread prosperity, and reduce carbon emissions. cp.catapult.org.uk

So, COP28 finally delivered. Nobody got everything they wanted, they never do, but there was just enough to give us hope. At one point things appeared more than a little desperate. The final deal on the phasing out of fossil fuels IS a major step forward. The final texts are far from perfect, and the lobbyists came in their droves, but lobbyists only turn up when they are scared. 

There is still a lot of work to do. We need renewed effort to crack the financial challenges. Our current financial systems mean that for capital to flow we need projects of investable credibility with risk adjusted returns that provide opportunities for profit, but at borrowing rates which cites can actually afford. 

An inability to break through this barrier will result in all those Hollywood dystopian scenarios becoming true; collapse of global agriculture and food systems; mass migration from drought ridden regions; subsequent rise of populist far right governments; increased conflicts around the world and the subsequent collapse of organised civic society. However, there’s a Wall of Sound coming out of COP28, the collective voice of city mayors, who will of course be on the frontline in dealing with these climate impacts. 

Cities cannot do this on their own however, governments must play their role, pledging commitment to the right policies and programmes that enable cities to get on with the complex aspects of delivery. There is a sense however, that the trust between central and local government across the world has been eroded and needs rebuilding. Cities are the powerhouses of green growth and if governments can give them the right policy instruments, they can unleash the huge social and economic dividends on offer.  

This is why it’s been pleasing to hear the growing momentum around the role of cities and mobilising private finance at COP, some of the themes emerging included; 

• The first Local Climate Action Summit hosted by Bloomberg and the COP28 UAE Presidency, the Urbanisation Ministerial for a second year running and the launch of CHAMP – Coalition for High Ambition Multilevel Partnerships. These welcome initiatives included a focus on mobilising public and private sector investment into cities. 
• A significant ramping up of the number of activities convening investors and cities with a growing appetite amongst the former to forge early stage engagement and meaningful partnerships with cities, including agreement to develop an investment blueprint based on Govanhill in Glasgow. 
• Recognition that investment also needs to be made on the social side of the just transition not just physical infrastructure in order that citizens benefit through increased jobs and skills. 
• Increased demand for proven examples of local climate action from cities that demonstrate successful collaborative partnerships with investors, including Bristol’s City Leap 
• Growing interest from the UK and internationally in the 3Ci model for convening cities and investors around development finance, including its deployment through the Urban SDG on Finance. 

All of this provides a platform for 3Ci to continue developing its pioneering approach, one that convenes city leaders and investors to unlock the barriers that hold back the flow of capital; 

• Firstly, developing new innovative financial models grounded in place that allows for the deployment of blended financial models. The launch of our Net Zero Investment Prospectus and the work of our Net Zero Investment Task Force will help create a network of credible investable neighbourhoods. 
• Secondly, aggregating projects to provide scale provides investors with a greater rate of return, which is why we have developed the National Net Zero Project Pipeline and our work on developing sub-regional approaches, including that in South Yorkshire 
• Thirdly, our work to design and establish a technical assistance facility that allows local authorities to access the right mix of support to enable them to develop more robust investable propositions. 

There is much to look forward to in 2024 and 3Ci already has an exciting array of events and initiatives planned. We will further strengthen our city relationships and grow our networks with investors, because the battle against climate change will ultimately be won or lost on the streets of cities. 

Two major new initiatives to help accelerate the net zero transition were announced on 29 June as 3Ci – the Cities Commission for Climate Investment – hosted a London Regional Investor Event at the headquarters of Connected Places Catapult. 

First was the launch of a 3Ci publication advocating the case for a National Net Zero Neighbourhoods Programme and a Call for Proposals from local authorities to submit projects looking for investment into the programme. 

A second initiative unveiled to delegates was the launch of a Green Finance Fund from the Mayor of London, where up to £500 million will be lent to projects that focus on energy efficiency, renewable energy and clean transport. 

Eligible organisations offered favourable borrowing will include local authorities and social housing providers, and grants are available for small size projects up to £75 million. The Fund was announced by Greater London Authority’s Assistant Director for Environment and Energy, Catherine Barber. 

Professor Greg Clark CBE, Chair of 3Ci and Connected Places Catapult welcomed London’s Deputy Mayor for Environment & Energy, Shirley Rodrigues to the stage to speak about The Mayor’s vision for achieving net zero in London. 

“Cities have to move fast with this agenda, but they are delivering,” she said. 

The event took place in London Climate Action Week, during which a large countdown clock was placed in Piccadilly Circus to remind people there are just over six years left in order to balance greenhouse gas emissions, and prevent global heating exceeding 1.5C above pre-industrial levels. 

Shirley Rodrigues added there is a “huge challenge” ahead for professionals involved in promoting net zero initiatives, adding that it was “great to be here” at the London Regional Investor Event to discuss opportunities with interested parties. 

The Deputy Mayor was joined on stage by Cllr Georgia Gould, the Leader of Camden Council and Chair of London Councils which represents 33 boroughs including the City of London. “One area where we have come together incredibly strongly is in our shared commitment to taking action on the climate crisis,” she said. 

“The work we have done with 3Ci shows huge investment is required to get us to net zero. But there is also a massive opportunity around jobs; ensuring there are the skills required around green finance, retrofit and new ways of working.” 

Georgia added that many boroughs have large housing stocks and a “massive ambition” to make them more sustainable, but that capacity and finance are often lacking. “The job of bringing those two together is a challenge, but is also a massive opportunity and that is why the work of 3Ci is so exciting: building and deepening the relationship between private finance and projects on the ground. 

“The prize is enormous and there has never a better moment to do this. Residents are facing a cost of living crisis and there is a huge desire from citizens to see change.” 

Financers give their thoughts 

In a ‘Dragon’s Den’ style, local authorities pitched their net zero projects and identified opportunities for investment during a series of breakout sessions. Investors then gave their responses on how to make the projects more investible and advice on financing models. 

Later at the event, Greg Clark was in conversation with HSBC’s UK Head of Climate Change, Tim Lord. Greg asked Tim why investors and financiers should consider local government, cities and the public sector as great places to invest if they want to achieve net zero outcomes. 

“There is a huge willingness to invest,” replied Tim, who added that “the lens has changed from ‘we should do this to hit targets’ or ‘it is the right thing to do’, to something that is much more existential about the future of an organisation and how you drive growth.” 

Cities are where the transition to net zero is likely to progress most quickly, he added, but in some cases, there can be quite high levels of risk for consumers or financial organisations. There is a need, therefore, to work with public sector organisations to help de-risk some of those investments to get them moving. 

Tim said another challenge is around scale. “We need to be confident the scale is coming, so that we can invest in the people and skills and types of financial investment models that we need.” But the backing of the public sector and the coming together of national, regional and local governments “is really important to give the financial services industry the confidence to do that”.  

Greg Clark turned to KPMG’s Director of ESG for Financial Services, Graham Smith and asked for his views on the public sector’s role in the net zero transition. 

Graham replied that city projects often have “a political push” but also need “people at different levels to make it happen”. Organisations need champions, he explained. “Every project has bumps in the road and so you need local government to remove those bumps. Getting all levels of a city working together to tackle this is really important.”  

Greg then asked for thoughts on the potential of sustainable financial returns for capital in net zero projects, and how they compare to other investment opportunities or asset classes. 

“Green money is just like brown money,” replied Graham. “It has to be repaid and give a return on capital, and it has to have a project behind it that works. A sustainable project that fails within the first six months or a year because it cannot generate return or cash flow; that project has no sustainable value. 

“Returns are important, but most important of all is for cities and local authorities to understand that lenders and investors look at the world in a different way,” he added.

Concluding remarks 

Wrapping up proceedings, the Mayor of Hackney, Philip Glanville remarked that there was a “palpable sense of buzz” at the event among participants “in trying to meet climate challenges”. 

Good work has been achieved by 3Ci in delivering a net zero pipeline, he added. “This is a unique UK wide partnership with London helping to lead the way.  

“Now it is about taking reflections from today and having the courage to start to experiment with the pipeline and talk to investors to see how we can move from a pipeline to a deliverable programme of work.” 

Catherine Barber remarked: “The 3Ci / Catapult model offers the chance to get together, learn and solve problems; that is what I really enjoyed today.” 

Following the event, Greg Clark said that the day “enabled us to have a conversation that is not otherwise possible almost anywhere in the world. 

“We focused on combining the value of the place with the logic of capital so that local government and city-wide government with pension funds, insurance companies, bankers and financial advisors can grasp the important task of investing in a liveable planet.”