Page 105 - Enhancing innovation and participation in smart sustainable cities

United for Smart Sustainable Cities
Enhancing Innovation and Participation

The GSHF has supported sustainable social housing by investing in three registered providers of social
13
housing .Investment by this fund has supported the refurbishment of over 2 500 properties. Properties were
made more environmentally friendly by improving insulation (e.g. solid walls, triple glazing), replacing boilers and
installing air source heat pumps.
Additionally, the development of the LGF demonstrated the ability to construct a financial instrument with a
limited scope that would still result as attractive to the private sector and could represent a step change in green
infrastructure in London.
Projects supported by the LGF can set the baseline for a transition to a low-carbon economy in the city. Results
from these projects will have a direct contribution to London’s environmental goals, by cutting carbon emissions
from the industrial and housing sectors and reducing waste.

3 Conclusions

The LGF was innovative at using a financial instrument (in the form of a holding fund) to de-risk the environmental
sector and unlock its potential contribution to London’s carbon mitigation targets. The development of the LGF
also proved that despite having a small geographic focus and niche investment area, a fund can still be attractive
for investors if an innovative design is backed up by experienced managers.
A critical success factor for the LGF was the identification of a financial market gap and its relationship with local
and regional environmental targets and funding initiatives. The LGF was effective at securing funding by tapping a
shared objective: cutting carbon emissions from the UK’s capital. By having public interests together, the LGF
became the right initiative to fill the market gap, attracting private investors to green infrastructure projects in
London.
Despite its early success, the LGF still faces a series of challenges ahead. Financial instability in the region, and
potential backlash from investors and managers due to unprecedented political conditions (e.g., Brexit) are the
most relevant ones. The latter could cause important structural changes in the structure of the fund, including
managers and funding sources. Ensuring an efficient management of proceeds from investments and interest
earned on un-invested capital, along with an effective monitoring of the performance of the fund should be a
priority.
Lessons learned from the LGF can be extended to other cities, particularly those in Europe as key funding sources
could also be applicable (e.g. ERDF, ELENA). The establishment of UDFs as individual revolving funds under a
holding mechanism could also be replicated in other cities. This financial structure could provide the right
ecosystem to fund different environmental projects in the long term.

Having secured more than GBP 500 million in funding for green infrastructure projects, the LGF is an important
stepping stone for future investment in the city. Further investment in the fund, along with the implementation
of similar initiatives will be key to achieving environmental targets and position London as a world leading low-
carbon capital by 2025.

A References

Amber Green (2012), Sustainable Capital, London Energy Efficiency Fund.

http://www.leef.co.uk/ (accessed 12 January 2017)

European Commission, JESSICA: Joint European Support for Sustainable Investment in City Areas.
http://ec.europa.eu/regional_policy/en/funding/special-support-instruments/jessica/#3
(accessed 11 January 2017)

13 The Housing Finance Corporation’s registered providers are: Gallions Housing Association, The Origin and A2Dominion.

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