Bristol City Council is one of more than a dozen looking to raise investment for green projects (Image: Getty)
are appealing to the public to help fund their net-zero projects. and Hackney, both of whom are experiencing financial hardship, have become the latest local authority to launch the initiative to help fund their . The scheme offers investors a yearly return of 4.2% over five years.
Experts have warned however that the schemes have “clear trade-offs” and advised that other, more reliable investment opportunities exist. Darius McDermott, of financial advisers Chelsea Financial Services, said: “While these schemes may appeal to those who want to make a direct local impact with their money, they come with clear trade-offs in return, protection, and liquidity.
The projects are raising money to fund green initiatives such as solar farms (Image: Getty)
“If you want to invest in renewable infrastructure, investment trusts are a much stronger option.
“Renewable infrastructure investment trusts offer higher yields, are fully regulated by the FSCS and FCA and, crucially, are extremely liquid.
“If you need access to your money, you can sell your shares at market price, whereas these council schemes lock up your cash for five years.”
Mr McDermott also labelled the return of 4.2% as “underwhelming” given it is below the of 4.5%.
To date, 257 people have invested £241,422 in the Climate Action Investment 1.
City Council, which had an overspend of £22m and was said to be at risk of going bankrupt by its leader, claimed that the scheme will allow it to invest in energy improvement schemes, fund heat pump installations and install solar panels.
Similarly, 115 people have invested £148,148 in Hackney Council’s green projects which will see similar green projects funded across the area.
Hackney Council says that it is “expecting to spend over £21m more than planned this financial year” on top of the “£52m in savings that we already need to find over the next three years.”
Councillor Robert Chapman, cabinet member for Finance, Insourcing and Customer Service at Hackney Council, said the scheme would help the council deliver on green projects.
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Bristol’s green led council warned last year that it was at risk of bankruptcy with a £22m overspend (Image: Getty)
He said: “We know many residents share our ambitious climate goals and want to help us deliver local climate projects for a greener, healthier Hackney.
“This framework provides a cost-efficient way for councils to finance climate action and for local people to invest in green projects that bring tangible benefits to the environment and their community.”
Financial provider Abundance Investment says that 15 councils across the country have launched the schemes which are described as “low risk” due to legal controls that ensure councils cannot default on their debts.
Abundance Investments also claim to conduct credit checks on councils prior to authorising any loans to ensure that they are capable of taking on further debt.
Experts have warned that investors could face issues getting their money back if the council ran into further financial difficulty subsequently as the investment is a peer to peer loan and thus is not eligible for the Financial Services Compensation Scheme (FSCS), which can protect up to £85,000 of your deposit if the provider goes under
Investors have also warned that the investment could prove difficult to sell on due to the requirement for it to be done on a secondary market.
Elliot Keck, of the TPA, said: “Bristol council’s desperate attempt to tap up taxpayers to fund their ruinous net zero drive paints a humiliating image of just how badly things are going wrong at that town hall.
“This is the same council that until recently was considering moving to four-weekly bin collections, a move that would have made life miserable for their residents.”
Abundance Investments Joint Managing Director, Karl Harder said: “Abundance Investment works hard to make sure investors understand both the benefits and risks of these types of investments. Community Municipal Investments can play a unique and valuable role in a portfolio providing an ISA eligible investment that offers a competitive annuity income and a positive impact in a community that is relatively low risk. In addition, investors have a 2 weeks cooling off period in which they can get a full refund if they change their mind.
“So far 15 councils have issued or committed to issue these types of investments from places across the length and breadth of the UK. Community Municipal Investments build on the UK’s long history of municipal bonds, a tool that built our communities in the 19 and 20 Century. They represent a new era of place-based investment by providing a way for people to earn a return, while making our communities more resilient and sustainable places to live and work.
“Our investors understand that in these challenging times both nationally and globally putting their money to work to help communities in the UK is a powerful thing to do. In fact a number of our investors have chosen to gift their interest back to their local council to further support their work.”
City Council and Hackney Council have been approached for comment.
Full List of councils
- Bristol City Council
- Hammersmith and Fulham Council
- Hackney Council
- Oxfordshire County Council
- Royal Borough of Greenwich
- Southwark Council
- Lewisham Council
- Westminster City Council
- Telford and Wrekin Council
- Cotswold District Council
- Camden Council
- Islington Council
- Warrington Council
- West Berkshire Council