Inclusive Climate Finance

How do we secure finance that improves climate resilience and also ensures the benefits reach all parts of society – particularly the communities most vulnerable to climate change?

Katerina Papavasileiou directs the ESG and responsibility team at Federated Hermes, an investment management company. As panel chair, she focused this session on a critical question: how can cities attract and enable inclusive climate finance?

We know it is possible to move capital to provide climate finance and community resilience, Katerina said. The question is – how fast is the sector willing to move?

Speakers

• Katerina Papavasileiou, ESG & Responsibility Director, Federated Hermes (chair)
• James Burrow, Managing Director, Better Society Capital
• Sam Ewuosho, Director, The Next Lighthouse
• Eleanor Lindsay, Head of Impact, Community and Place, The Hyde Group

Eleanor Lindsay, The Hyde Group

Eleanor is Head of Impact, Community and Place at The Hyde Group. The Hyde Group is a G15 housing association that manages 44,000 homes across London and the South-East.

The panel looked to Eleanor to help define the scale of climate resilience challenge we face. She made the case for taking a practical approach, thinking about what climate resilience means for organisations such as Hyde, and then scaling up from there.

• To improve on climate resilience, we must think about all the competing pressures that are hitting an organisation like Hyde. They carried out 70,000 repairs last year, and this was up 20 per cent.  Issues like damp, mould and building safety put further pressure on services. Retrofit is a huge challenge. Hyde have 6.5k homes that need to get to ‘EPC C’ energy performance by 2030.
• Put simply, housing associations don’t have enough money. The impact of rent caps alone mean that G15 landlords have £400 less to invest per home each year. In this context, Eleanor asked, how can we get housing associations into a different dialogue with funders, policy makers and investors? This could enable them to think longer-term, whilst dealing with pressing issues in the present.
• Partnerships can offer a way forward; Hyde’s joint venture with M&G has helped them deliver on their commitment to sustainability. The investment lens on reporting has helped them get into the granular detail needed to make change happen.

“The people who can least afford it and are often those living in the least insulated homes, pay some of the highest service charges due to heating cost. This fuel poverty is just not acceptable.” – Eleanor Lindsay

Sam Ewuosho, The Next Lighthouse

Sam is founding director of impact advisory firm The Next Lighthouse. His recent focus has been tracking the capacity of cities to attract green finance and analysing why some are more able to do so than others.

Cities and municipal authorities are becoming focal points for climate strategies, Sam said. The panel looked to Sam to share financing mechanisms available to city-level governments.

The are five basic types of financing models typically used by cities, Sam said. These are direct subsidies, place-based asset clusters, classic private-public partnerships, revenue sharing, and green bonds:

• Direct subsidies are easily understood and therefore hugely popular. But they’re difficult to scale and make long-term. Subsidies sometimes have an inflationary effect on materials in need; the market ends up pricing in the cost.
• Green bonds are effective, but reward those who already have money. Because the poorer you are, the less you are able to pay back and the more the premiums are. For example, Malmö has AAA rates, but doesn’t need it as much as most cities.
• Asset clustering basically means bundling together assets that earn no money, with ones that earn lots of money, to create one vehicle that is attractive to investors – however they can be complex to implement.
• The European Union is a powerful source not only of finance, but also of labelling that can attract other funding. Macedonia’s place-based strategy, endorsed by the EU, is an example of this working.

“We’ve gone up from around £300 billion to £800 billion in climate finance flows [globally] in the past five years. That’s been really positive. The bad news is that number needs to be about £4.6 trillion by 2030, and close to £6 trillion by 2050. So, something must happen, and it must happen quickly.” – Sam Ewuosho

James Burrows, Better Society Capital

James is managing director at Better Society Capital, where he’s worked for a decade. Better Society Capital works to build financial markets in the UK that intentionally target positive impact in the UK. It has invested £700 million  and grown this market 10x in the last 10 years.

Better Society Capital sits at the intersection between public sector, finance, enterprise and civil society. It’s able to translate between these organisations in various ways.

Not all private sector capital is made equally, James warned. It’s up the public sector to do their due diligence and what’s value-oriented and what isn’t.

There are areas where equitable finance for climate resilience is possible, James said. While these aren’t usually like-for-like replicable, James shared some of the roles organisations can play to make this more possible.

• There are a few essential questions to understand what best practice looks like: Clarity – what are we trying to achieve? Coordination – which stakeholders are involved? And finally, how do we catalyse investment? James calls these the ‘three cs’.
• We need to think about how capital comes together in place, James urged. Blended finance is a key solution. Local authorities can pull different projects together and create one entity for the purpose of interfacing with developers and sharing risk.
• Community ownership models can be an important way of managing who benefits from where money is flowing. They can help build up community benefit funds and even support community groups to make their own investment funds.
• No one stakeholder in the built environment is going to have the answer. Part of systems-thinking is exploring, when you pull a thread, what is this thread related to? Local authorities are not using the language around financial risk, but this what financial markets are doing: this is about working in a joined-up way.

“There’s a misperception that because power comes with money, all the ideas will come from where the money is. When in reality – it’s often the opposite.” – James Burrows

Future of London’s takeaways

Our inclusive finance panel was a much-awaited session. Financing climate resilience was identified as a key barrier across many other conference discussions.

The panel tackled funding mechanisms, investing in communities, what best practice looks like and government policy. They agreed that equitable finance for climate resilience is possible, but is currently minute when compared to what needs to be delivered.

Organisations in client-facing roles such as housing associations often aren’t equipped with the money to think long-term. Something needs to change, and quickly.

Panellists agreed that two key practical ways forward are blended finance and asset clustering and as well as community-based ownership models. Jame Burrows’ rule of ‘the three Cs’ – clarity, coordination and catalysing – is a useful compass for the way forward.

Conference session write-ups

Keynotes: Mete Coban (Deputy Mayor), Emma Howard Boyd (London Climate Resilience Review), Indy Johar (Dark Matter Labs)

Fresh Perspectives – Young people-led panel discussion

Fresh Perspectives – Two US projects using art and culture to explore climate resilience

Including All Voices – ensuring communities are fully involved

Neighbourhood Futures – Tackling climate resilience and health equity

Homes and Buildings – Designing inclusive climate approaches

Council-led Housing Network – climate resilience through council development

Fresh Perspectives – Alumni ideas on climate resilience, plus domestic retrofit and infrastructure innovation in Arnhem

Inclusive Finance – Financial models for equitable climate resilience

Neighbourhoods – Designing inclusive climate approaches

Health and Racial Equity – Developing community-led action for ethnic minority communities

Make It Happen – Closing plenary with conference takeaways, including governance, finance and partnerships

Strand Aldwych Walking Tour – how a striking new landscape was created in the historic London

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The conference is part of our major Knowledge programme for 2024/25, with a final report in Spring 2025. Find out more about our Climate Resilience and Equity programme.

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