Page 103 - Enhancing innovation and participation in smart sustainable cities
P. 103
United for Smart Sustainable Cities
Enhancing Innovation and Participation
The LGF was specifically designed to contribute to London’s environmental vision and strategy. Investment in
energy efficiency, waste management and greener social housing projects from LGF projects would directly
contribute to the city’s goals of reducing carbon emissions by 60% by 2025, and cutting the amount of waste that
ends up in landfill. Furthermore, the LGF would push London towards a lower carbon economy by supporting the
generation of green infrastructure related jobs and triggering further investment in the sector.
The LGF follows the structure of a holding fund model. In this way, the fund does not directly invest in projects
but makes financial contributions to individual UDFs. The fund was structured in a way that both public and private
partners could get involved.
An Investment Board comprised of seven representatives was set up for the management of the fund. The
Investment Board appointed EIB as Holding Fund Manager due to its track record in environmental fund
management, along with its alignment with the economic development agenda. EIB’s experience in the business
raised LGF’s credibility and boosted the confidence of public and private investors. Likewise, each of the UDFs had
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a fund manager, which was selected through an open and competitive process .
Role Partner
Intermediate Body Greater London Authority (GLA)
Funding Partners GLA, London Waste and Recycling Board
Holding Fund Manager European Investment Bank
UDFs Fund Managers LEEF: Amber Infrastructure Ltd.
FEF: Foresight Group
GSHF: The Housing Finance Corporation
Other investors LEEF: Royal Bank of Scotland, INPP, European Investment
Bank (through ELENA)
FEF: European Investment Bank
GSHF: Pension Funds
Another key feature of the LGF is that it moved away from traditional grant-based funding models. This would
allow monies to be reinvested in further carbon reduction projects while generating low-carbon growth and jobs
in an efficient way.
The LGF was innovative by using a financial instrument to exploit energy efficiency, waste and greener social
housing as London’s biggest carbon mitigation opportunities. The London Energy Efficiency Fund (LEEF; equity
fund), the Foresight Environmental Fund (FEF; loan fund) and the Greener Social Housing Fund (GSHF; not for
profit loans) were created as independent UDFs which were contractually obliged to attract private-sector funding.
This segmentation of the market would provide flexibility to each UDF and make the LGF more adaptable to
changing market conditions.
Despite the LGF being small in geographic focus and having a niche investment area for the commercial market, it
was successful at adopting an attractive structure for investors. The presence of experienced fund managers along
with the innovative financial approach of the fund, successfully de-risked the environmental sector and highlighted
the opportunity for growing the market in London.
2.2 Implementation
The LGF started as a GBP 100 million fund (EUR 118), constituted in the following way:
European Region Development Fund (ERDF): GBP 50 million (EUR 59 million)
London Waste and Recycling Board (LWaRB): GBP 18 million (EUR 21.2 million)
London Development Agency (LDA): GBP 32 million (EUR 37.8 million)
8 UDFs managers were fairly selected, through an open and competitive process published in the Official Journal of European
Community
U4SSC series 101
