Building a market for environmental impact investment

Posted by James Mansfield on 5th October 2018

Jamie Mansfield

Environmental Finance (“EF”) is working to disrupt the conversation around conservation, to encourage recognition of natural asset spend as an investment rather than a cost. We are forming partnerships to create a pipeline of projects which will catalyse investment into natural and built assets across the UK.

Global demand for investment in conservation is currently estimated to be over USD$300bn. The mismatch between demand and supply boils down to appeal – investment opportunities need to be attractive to philanthropic, impact, and commercial investors.

This upcoming Green GB Week, EF is recognising the progress we’ve made and continue to make. But we are also making it clear where greater policy and support is needed to accelerate growth of the UK’s environmental impact investment sector.

Energy for our local communities

We are working to empower communities to take ownership of clean growth, and give local voices support in the energy markets. The UK’s renewable energy subsidy cuts and changes in legislation stalled the development of the community energy sector, and resulted in solar sites which were intended for the community, remaining in commercial hands. Poised to act, EF designed a pioneering £50 million community energy investment programme, Community Owned Renewable Energy Partners (CORE). CORE is working to turn operational solar farms into community owned assets and maximise the financial, environmental and social impact within the local community. CORE is backed by two leading social impact investors, Big Society Capital and Power to Change. By partnering with these organisations, CORE is able to maximise its breadth and depth of influence across a large network of charities, policymakers, and banks across the UK.

Igniting private investment in conservation

Together with the UK’s largest conservation organisations, EF is working to create stable financial products to increase investment in the UK’s natural environment, including models for forestry, river catchments, farming and urban parks. We want to engage new investors and grow the market to meet investment demand.

With one of our key charitable partners, we have been involved in creating innovative solutions to scale-up land conservation and encourage renewable energy initiatives. Our strategy in shoring up financial resources and identifying revenue streams helps to give organisations confidence and build financial robustness. Aligning with the government’s Clean Growth Strategy, the charity has iterated its own strategy and action plan to investigate how a low carbon energy future can be realised in the UK.

Generating greater flows of investment through policy

We are working to generate momentum in the conservation and environmental financing space across the UK – but government policies do need to change. The immediate future policy environment presents a unique opportunity to cultivate models that can be both sustainable and deliver improved outcomes for investors and organisations alike. Government’s role should be to put the commitments in the 25 Year Environment Plan on a statutory footing, supported by policies that encourage private investment in natural assets. Policies such as strengthening the domestic carbon market or implementing a biodiversity net gain requirement for developments would provide considerable support for additional investment. A continuing dialogue with the government and key stakeholders in the investor and project developer community could enable the changes in the policy environment needed to grow the market.

We have engaged with the UK government to devise the nation’s inaugural natural capital impact fund to catalyse private investment into the protection and enhancement of the natural environment. This could be the key to accelerate the development of the environmental investment market, and unlock the scale of capital that is required to underpin the government’s objective to leave the natural environment in a better state than it was found.

James Mansfield is Co-Founder and Managing Director at Environmental Finance

This blog is part of the Aldersgate Group's series ahead of Green GB Week. This week will highlight the opportunities of clean growth and the role of business and the public in tackling climate change. RSVP here to our Green GB Week event 'Great Britain’s Clean Growth Story: celebrating business success and tackling the challenges ahead.'