Steve Turner, director of the UK Cities Climate Investment Commission (CCIC), explains how the commission is seeking to close the funding gap in the UK to enable crucial green projects to go ahead, and considers the ways the commission’s model could be scaled internationally.
The UK CICC wants to use innovative new approaches for securing investments
SmartCitiesWorld: What is the UK Cities Climate Investment Commission (UK CCIC) and what is its role in advancing urban climate action?
Steve Turner: The vision of the CCIC is ostensibly to support local authorities in securing the necessary long-term finance to achieve their net-zero goals and ambitions. We aim to do that in three ways.
The first is in innovating new approaches and mechanisms for securing investments, and then testing and deploying these within the market. The second way is to accelerate the speed of collaboration by using the commission’s convening power between local and national government, industry, and financial institutions. The third mechanism is to advocate for changes in the approach to investment across both local and national governments in order to help secure the level of investment they need.
If we’re successful in those approaches, it will reduce cities’ reliance on carbon, increase levels of investment in net-zero projects, and also grow the supply chain deployment of low-carbon technologies in the marketplace.
CCIC was initially a partnership between Connected Places Catapult, the UK’s 11 Core Cities, and London Councils. We’ve since expanded to include the whole of the local authority and local government family in all its manifestations, including the M10 mayoral group, which represents the metropolitan mayors from the combined authorities.
If we’re successful, it will reduce cities’ reliance on carbon, increase levels of investment in net-zero projects, and also grow the supply chain deployment of low-carbon technologies in the marketplace
We published a research analysis report last year which identified a £209bn opportunity cost based on the investment plans of the commission’s founding cities to achieve their net-zero ambitions. As part of that work, we developed a place-based approach and concept model for reaching net-zero.
Following that, and immediately after Cop26, we secured money from Bayes to move to the next stage, which is ostensibly around delivering the business case for that concept model within Green Book Treasury guidelines. We have £1m for that programme to develop a long-term place-based approach to net-zero, with a focus on development and finance.
I’ll make a distinction here between what we call project finance, which is finance primarily from private sector institutions to fund capital investment in actual projects, and development finance, which is the actual finance required to bring a project to market. For development finance, it’s about assessing three areas: firstly, identifying the right projects; secondly, undertaking the right technical work in engineering; and finally, underwriting the technical work to deliver it financially.
It takes quite a long time from identifying a project to undertaking all the technical work to make it a bankable proposition – nobody’s willing to pay for that, so that’s the gap that CCIC is focusing on. How we close that gap in a way that can be delivered nationally is something that is attracting quite a lot of interest.
SCW: What does that process look like in trying to close up that gap in development finance? Do you find it potentially quite a hard sell for the private sector or something they’re now looking to be involved with?
ST: It is something that they are increasingly willing to get involved with. Private sector institutions are recognising that if they invest at this stage, then ultimately there will be more projects for them to actually invest in, which is where they’ll see financial benefits further down the line. I think they’re starting to see that they will need to work very much in partnership with local authorities.
We’re seeing a number of institutions now talking to us about how they can co-invest in development financing. The only mechanism that’s been operated thus far in that space has been through the EIB or the ELENA facility. That only gave them a certain period of time, however, and a certain number of projects. Since Brexit, UK authorities can no longer access that facility – nor has it been replaced by the government – so we’re looking to fill that void.
Private sector institutions are recognising that if they invest at this stage, then ultimately there will be more projects for them to actually invest in
SCW: When it comes to communicating with the private sector and those that might invest in development financing, how big a factor do you think reputation based on green credentials, or those of their competitors, could be as we move forward?
ST: I think they’re doing it primarily based on the financial bottom line and any revenues they could generate. They’re starting to see the opportunities financially in net-zero investment and renewables and the like, as opposed to taking action based on the CSR agenda.
Private sector organisations and institutes invest in different ways but a number of investors are looking to divest and diversify their portfolios. We’re in really difficult times globally; one consequence of that is the significant increase rise in the price of oil and gas.
That’s clearly driving investment in renewable sources of energy which provides a window of opportunity to achieve some of this transition, but that’s just on the supply side. On the demand side, we must think about retrofitting commercial and residential buildings, about EV charging infrastructure and a number of other elements that need to be factored in.
There’s no doubt that both the policy and the financial landscapes are coming together to make for a much more attractive proposition in terms of bottom-line investments for financial institutions. They will want to brand and market those as green investments, but the bottom line is they will only make the investments if they’re going to make significant enough returns.
A significant gap exists between identifying a project to showing it is a bankable proposition
SCW: Do you think there has been more uptake due to the ’green recovery’ narrative as a result of Covid-19?
ST: The UK Industrial Strategy made quite a significant play about growth in green industry jobs, but the steps to achieve that growth were absent in the levelling up whitepaper. The issues are really around achieving a just transition to net zero. There are different degrees of affordability to pay for these things, depending where you live.
The costs of retrofitting a terraced house in the northeast of England and a similar property in a more affluent London borough are the same, relatively speaking, but the household disposable income available to have the work done are very different. Equally, there are large parts of London and the south that are deprived areas. They often require greater investment to achieve net zero.
SCW: Looking at this on a wider scale, do you see opportunities for the UK to be a destination for foreign direct investment for its green projects, or an exporter of more green goods and services?
ST: From a CCIC perspective, the programme we’re running is unique. We haven’t done this before and we’re not currently seeing it replicated anywhere else globally – though we know from working with other organisations, such as C40, that there is interest in seeing how this approach could be mapped to other places on an international scale. We’re creating the largest single, urban, net-zero market in the world, and we know we have some advantages in the UK in doing that.
We have great cities working together on this – cities with a history and tradition of working collectively in this way. With the City of London as a core partner, which is home to some of the largest global financial institutions in the world, we can coalesce and bring those two elements together perhaps more easily than other nations can.
The scale we’re working at presents benefits to investors too, because they can have a single conversation with us which represents conversations with all of our local authorities
It is groundbreaking and unique, and that presents opportunities – once the finance is there and you’re looking to deliver projects – for the supply chain and to stimulate green growth and jobs. That relies on money coming through, so it’s a little further in the future, but our hope is that that it will stimulate investment and in turn stimulate growth of the number of green businesses that emerge around renewables and retrofitting – both in design of technologies and in their implementation, maintenance and operation. They could then be exported on a larger scale to a global marketplace.
SCW: Since the Commission launched in July 2021 with the original core cities and authorities, what has the process been like in bringing others into the fold? Presumably, cities are keen to involve themselves with the CCIC.
ST: They are – the speed and depth at which the programme has run so far is remarkable. That’s testament to the leaders of the cities and authorities that we’ve worked with as part of the initial membership. They’ve been tremendous advocates of the work and they recognise the benefits that it brings, both nationally and for them locally. We’ve managed expectations to this point, which is quite a big challenge now that we’ve widened the membership to all local authorities. There’s now significant interest because the authorities don’t individually have the capacity to bring these projects to market.
We’ll collect all the projects from the local authorities, prioritising our founding partners, and categorise and collate them into a national pipeline
The scale we’re working at presents benefits to investors too, because they can have a single conversation with us which represents conversations with all of our local authorities, as opposed to myriad conversations with them individually. What we hope to do is present a blueprint to them laying out the investment mechanism, which will simplify the process and, again, prevent them having to go through all the different processes at a local level individually.
SCW: When you consider the action that’s needed in cities to improve connectivity and sustainability in so many different public services, do you think this investment commission model could scale to address other issues?
ST: It is certainly something that core cities are starting to think about. It’s a model that could absolutely be deployed in other areas, so it is one to watch without question. It could provide a model for doing much wider work, be it in transport, housing, health – anywhere that a streamlined approach to investment might be required.
SCW: What are the next steps for the CCIC?
ST: Using this convening power that we now have, we’re looking at establishing a national net-zero project pipeline. We’ll collect all the projects from the local authorities, prioritising our founding partners, and categorise and collate them into a national pipeline. It will help give a sense on a geographical level of where projects are and what we need to do to move them on to bankability.
Equally, we’ll then be able to aggregate them around particular assets; we could have 12 commercial retrofit projects or 20 EV infrastructure projects, which could then offer a different way of securing investment for them on a larger scale. We will be working on that over the next six months, and likely above and beyond that, because it is a really attractive proposition for local authorities.
Steve Turner, director of the UK Cities Climate Investment Commission (CCIC), explains how the commission is seeking to close the funding gap in the UK to enable crucial green projects to go ahead, and considers the ways the commission’s model could be scaled internationally.
SmartCitiesWorld: What is the UK Cities Climate Investment Commission (UK CCIC) and what is its role in advancing urban climate action?
Steve Turner: The vision of the CCIC is ostensibly to support local authorities in securing the necessary long-term finance to achieve their net-zero goals and ambitions. We aim to do that in three ways.
The first is in innovating new approaches and mechanisms for securing investments, and then testing and deploying these within the market. The second way is to accelerate the speed of collaboration by using the commission’s convening power between local and national government, industry, and financial institutions. The third mechanism is to advocate for changes in the approach to investment across both local and national governments in order to help secure the level of investment they need.
If we’re successful in those approaches, it will reduce cities’ reliance on carbon, increase levels of investment in net-zero projects, and also grow the supply chain deployment of low-carbon technologies in the marketplace.
CCIC was initially a partnership between Connected Places Catapult, the UK’s 11 Core Cities, and London Councils. We’ve since expanded to include the whole of the local authority and local government family in all its manifestations, including the M10 mayoral group, which represents the metropolitan mayors from the combined authorities.
If we’re successful, it will reduce cities’ reliance on carbon, increase levels of investment in net-zero projects, and also grow the supply chain deployment of low-carbon technologies in the marketplace
We published a research analysis report last year which identified a £209bn opportunity cost based on the investment plans of the commission’s founding cities to achieve their net-zero ambitions. As part of that work, we developed a place-based approach and concept model for reaching net-zero.
Following that, and immediately after Cop26, we secured money from Bayes to move to the next stage, which is ostensibly around delivering the business case for that concept model within Green Book Treasury guidelines. We have £1m for that programme to develop a long-term place-based approach to net-zero, with a focus on development and finance.
It takes quite a long time from identifying a project to undertaking all the technical work to make it a bankable proposition – nobody’s willing to pay for that, so that’s the gap that CCIC is focusing on. How we close that gap in a way that can be delivered nationally is something that is attracting quite a lot of interest.
SCW: What does that process look like in trying to close up that gap in development finance? Do you find it potentially quite a hard sell for the private sector or something they’re now looking to be involved with?
ST: It is something that they are increasingly willing to get involved with. Private sector institutions are recognising that if they invest at this stage, then ultimately there will be more projects for them to actually invest in, which is where they’ll see financial benefits further down the line. I think they’re starting to see that they will need to work very much in partnership with local authorities.
We’re seeing a number of institutions now talking to us about how they can co-invest in development financing. The only mechanism that’s been operated thus far in that space has been through the EIB or the ELENA facility. That only gave them a certain period of time, however, and a certain number of projects. Since Brexit, UK authorities can no longer access that facility – nor has it been replaced by the government – so we’re looking to fill that void.
Private sector institutions are recognising that if they invest at this stage, then ultimately there will be more projects for them to actually invest in
SCW: When it comes to communicating with the private sector and those that might invest in development financing, how big a factor do you think reputation based on green credentials, or those of their competitors, could be as we move forward?
ST: I think they’re doing it primarily based on the financial bottom line and any revenues they could generate. They’re starting to see the opportunities financially in net-zero investment and renewables and the like, as opposed to taking action based on the CSR agenda.
Private sector organisations and institutes invest in different ways but a number of investors are looking to divest and diversify their portfolios. We’re in really difficult times globally; one consequence of that is the significant increase rise in the price of oil and gas.
That’s clearly driving investment in renewable sources of energy which provides a window of opportunity to achieve some of this transition, but that’s just on the supply side. On the demand side, we must think about retrofitting commercial and residential buildings, about EV charging infrastructure and a number of other elements that need to be factored in.
There’s no doubt that both the policy and the financial landscapes are coming together to make for a much more attractive proposition in terms of bottom-line investments for financial institutions. They will want to brand and market those as green investments, but the bottom line is they will only make the investments if they’re going to make significant enough returns.
SCW: Do you think there has been more uptake due to the ’green recovery’ narrative as a result of Covid-19?
ST: The UK Industrial Strategy made quite a significant play about growth in green industry jobs, but the steps to achieve that growth were absent in the levelling up whitepaper. The issues are really around achieving a just transition to net zero. There are different degrees of affordability to pay for these things, depending where you live.
The costs of retrofitting a terraced house in the northeast of England and a similar property in a more affluent London borough are the same, relatively speaking, but the household disposable income available to have the work done are very different. Equally, there are large parts of London and the south that are deprived areas. They often require greater investment to achieve net zero.
SCW: Looking at this on a wider scale, do you see opportunities for the UK to be a destination for foreign direct investment for its green projects, or an exporter of more green goods and services?
ST: From a CCIC perspective, the programme we’re running is unique. We haven’t done this before and we’re not currently seeing it replicated anywhere else globally – though we know from working with other organisations, such as C40, that there is interest in seeing how this approach could be mapped to other places on an international scale. We’re creating the largest single, urban, net-zero market in the world, and we know we have some advantages in the UK in doing that.
We have great cities working together on this – cities with a history and tradition of working collectively in this way. With the City of London as a core partner, which is home to some of the largest global financial institutions in the world, we can coalesce and bring those two elements together perhaps more easily than other nations can.
The scale we’re working at presents benefits to investors too, because they can have a single conversation with us which represents conversations with all of our local authorities
It is groundbreaking and unique, and that presents opportunities – once the finance is there and you’re looking to deliver projects – for the supply chain and to stimulate green growth and jobs. That relies on money coming through, so it’s a little further in the future, but our hope is that that it will stimulate investment and in turn stimulate growth of the number of green businesses that emerge around renewables and retrofitting – both in design of technologies and in their implementation, maintenance and operation. They could then be exported on a larger scale to a global marketplace.
SCW: Since the Commission launched in July 2021 with the original core cities and authorities, what has the process been like in bringing others into the fold? Presumably, cities are keen to involve themselves with the CCIC.
ST: They are – the speed and depth at which the programme has run so far is remarkable. That’s testament to the leaders of the cities and authorities that we’ve worked with as part of the initial membership. They’ve been tremendous advocates of the work and they recognise the benefits that it brings, both nationally and for them locally. We’ve managed expectations to this point, which is quite a big challenge now that we’ve widened the membership to all local authorities. There’s now significant interest because the authorities don’t individually have the capacity to bring these projects to market.
We’ll collect all the projects from the local authorities, prioritising our founding partners, and categorise and collate them into a national pipeline
The scale we’re working at presents benefits to investors too, because they can have a single conversation with us which represents conversations with all of our local authorities, as opposed to myriad conversations with them individually. What we hope to do is present a blueprint to them laying out the investment mechanism, which will simplify the process and, again, prevent them having to go through all the different processes at a local level individually.
SCW: When you consider the action that’s needed in cities to improve connectivity and sustainability in so many different public services, do you think this investment commission model could scale to address other issues?
ST: It is certainly something that core cities are starting to think about. It’s a model that could absolutely be deployed in other areas, so it is one to watch without question. It could provide a model for doing much wider work, be it in transport, housing, health – anywhere that a streamlined approach to investment might be required.
SCW: What are the next steps for the CCIC?
ST: Using this convening power that we now have, we’re looking at establishing a national net-zero project pipeline. We’ll collect all the projects from the local authorities, prioritising our founding partners, and categorise and collate them into a national pipeline. It will help give a sense on a geographical level of where projects are and what we need to do to move them on to bankability.
Equally, we’ll then be able to aggregate them around particular assets; we could have 12 commercial retrofit projects or 20 EV infrastructure projects, which could then offer a different way of securing investment for them on a larger scale. We will be working on that over the next six months, and likely above and beyond that, because it is a really attractive proposition for local authorities.
Recent Posts
Recent Comments
Archives
Categories