How to fund a green future across the UK
Following more than a decade of top-down policies, austerity and underinvestment by the centre, a simple truth is dawning on local leaders: Whitehall is not coming to save them.
Luckily, those committed to place-based renewal are discovering powerful allies in the form of patient, purpose-driven investors. Because of this, a quiet renaissance in place-based impact investment is underway, restoring agency to local people and places, accelerating policy priorities including climate action and just transition.
The UK's vibrant impact capital market offers a diverse range of resources waiting to be mobilised. This includes over £76 billion of institutional impact investment, a market growing by 10% annually. Local Government Pension Schemes (LGPS), which collectively manage £400 billion, are a growing player in this market, with more fund managers making investments which aim for local social and environment impacts in addition to financial returns. Other types of impact capital complement this large-scale capital to draw innovative solutions and services towards maturity and scale: philanthropy offers risk-tolerant funding essential for capacity building and seeding new approaches; social investment provides flexible, outcomes-based finance ideal for boosting social enterprises; while grassroots 'community-based’ models empower people to invest directly in their areas, democratising capital and strengthening local ownership through models like local green bonds.
Pioneering practices across the UK are demonstrating the benefits of this approach. In Plymouth, a partnership between the city council and Rebalance Earth is mobilising private capital from West Yorkshire Pension Fund and others to deliver flood prevention solutions along the River Plym, protecting the city's businesses and residents from future climate-related risks. In Stirlingshire, the Fintry Development Trust operates a wind turbine, enabled by Better Society Capital’s Community Energy Catalyst. Profits generated from the turbine are reinvested directly into the community for projects from home insulation grants to funding local energy efficiency initiatives. West Berkshire partnered with Abundance to raise £1 million to install solar panels across their public estate through Community Municipal Investments (CMIs), a form of bond where individuals can lend to councils for local green projects with as little as £5.
Embracing partnerships which mobilise the creative and capital resources of the UK’s impact economy will be an essential skill for place leaders if we want to drive the green transition and wider national renewal over the next decade. The first step will be for more leaders to shift from a scarcity mindset, where each area trades on disadvantage chasing limited pots of public funding, to a mobilisation mindset. This means using the assets you already have, from procurement budgets to pension funds, to inspire match contributions from others, devising compelling investment propositions that attract a wide range of capital. In a world of increasing political and cultural instability, this can also mean attracting impact capital from overseas that is actively seeking more politically stable destinations aligned with its values. Such a shift in approach inspires new thinking, new partnerships and new possibilities. This is a long-term commitment, but one that promises lasting benefits for generations.
This article was originally published as part of a collection commissioned by the Green Liberal Democrats to coincide with the 2025 Liberal Democrat Autumn Conference in Bournemouth.