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Transformative Investment

Communities need to deliver transformative investment at a much greater speed and scale than they have managed before

Given that communities will generally need to invest billions of euros over the coming years, if they are to achieve their missions, Transformative Investment is a very critical enabler of change.

An Economic Case for Radical Change

An important step in developing a transformative investment approach is to develop an overall economic case for the missions a community wants to achieve.

This economic case analysis helps us to see and communicate the scale of investment really needed to achieve the mission and the overall economic value of these investments.

For example, we have been working on the economic case for decarbonisation in SE Europe – focussed so far on the cities of Niš and Skopje, and also Slovenia on a national scale. This work highlights that there would be significant economic returns to communities that take on a radical mission to decarbonise by 2030. For example:

  • For the case of Slovenia an almost 300% return could be generated on €10 billion of decarbonisation investment by 2030 that helps to create more than 10,000 annual jobs.
  • Niš could double current ambitions, projected GHG emission reductions (from 25% to 50% of total emissions), and required capital investment (from €650 million to €1320 million) while still achieving a positive return on investment of over 200%.
  • An ambitious decarbonisation programme for Skopje could reduce total emissions by 50% by 2030 (97% in the sectors we modelled) for a total capital investment of approximately €2300 million with benefits in reduced health and energy costs that outweigh the required investments by about 300%.

These sorts of results show how radical action is a very good investment. In this case, radical climate action could equally be framed as being primarily about health and energy security, with decarbonisation as the bonus.

The analysis also gives us a stronger sense of the mission’s investment challenges, which helps community stakeholders to engage with what it will take to unlock the needed investment. For examples, these examples also show how the overall positive social value case can remain disconnected from decision making in today’s economy. This economic disconnect undermines opportunities for both investment and action, and needs to be addressed with better business models, economic structures and investment mechanisms.

Investment Mechanisms

Equipped with a better understanding of the economic value behind a mission, communities need to develop mission-aligned investment mechanisms that are able to unlock and manage the financial capital at the speed and scale really needed.

These mechanisms must be able to facilitate a suitable stack of public, community and private finance that matches to the stack of action needed to achieve the mission. This means designing for investment in specific actions, as well as developing more integrated local fund models.

Sources of finance in such an investment stack might include:

  • Green Bonds – including newer forms of performance bonds that better link outcomes to payments
  • Public and European investment programmes – as in the context of the pandemic recovery, smart investment and leverage of public stimulus investment will be especially critical
  • Impact investment – private capital that seek to balance return with impact objectives
  • Collective community investment. Crowd-investment and funding models that enable citizens and businesses to invest in local initiatives that deliver both social impact and moderate financial returns.

Development of regional/city fund models can potentially harness these potential forms of finance through blended project and finance structures with different ‘class’ levels of risk and return. This can help to attract private capital against community and public capital and then to deploy this across the action portfolios. It is important to design such fund structures with robust governance and systems that will be classified as ‘bankable’ by the institutional investor market.

We are also working to help to broker investment into community projects and programmes through our expanding investment portal.

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