How can municipalities play their vital role in the energy transition and meet Net Zero targets? What if it were possible for them to use the principle of crowdfunding to finance projects that will make society more sustainable and resilient in the future?
Against a background of overall borrowing prudence and austerity, municipalities of varying scales are being asked to lead on the biggest issues facing European countries, including decarbonisation, the building of social housing and providing effective social care to an ageing population. If they are to meet these challenges over the coming decade, sourcing competitive capital and working with residents to find solutions will be essential.
But where can they find the financial resources? At a time when public sector finances are under increasing pressure, crowdfunding – still mistakenly seen as being just another form of charitable giving – has the potential to offer a new model of public finance via an investment-based business model that generates social, environmental and economic returns.
In May 2019, the PROSEU project partner University of Leeds released a report entitled Financing for Society, setting out crowdfunding options for the public sector in raising finance and, in particular, the concept of Community Municipal Investment (CMI). A CMI is structured as a loan or bond and is issued to citizens directly by the local municipal authority. It is ring-fenced only for local green and social infrastructure projects.
The University of Leeds and the Abundance Investment platform have been working with 60 local governments across the UK for several years to put the concept into practice. The CMI was co-created by the Financing for Society project and the UK’s first CMI was given the green light by West Berkshire Council on 30 April 2020. Another 10 are expected to follow this year, including by the city of Bristol, with whom PROSEU is working in the framework of its Living labs.
Individuals both in and outside of West Berkshire will now be able to invest in the new ‘community bond’ from as little as £5 to support specific projects that align with the council’s declaration of a Climate Emergency in July 2019 and its subsequent Environment Strategy. The community bond will allow residents to invest in green infrastructure projects – such as installing rooftop solar panels on a building at Greenham Common and on the rooftops of local schools.
In return for supporting the council’s aims to become carbon neutral by 2030, investors will receive a long term, low risk return. CMIs can also be used to supplement, diversify or replace sources of borrowing to fund specific infrastructure projects, or to refinance existing debt. In the UK, the CMI is now cheaper than other forms of public sector borrowing and provides a better rate of return for citizens than their long-term savings and investment products offered by banks.
For more information on ICLEI and the work they are doing to support local governments and municipalities across Europe and beyond, click here.