How councils are asking residents to invest in their own climate future
When UK councils began declaring climate emergencies, they ran straight into a familiar problem: no money to act on them. A decade of austerity had stripped councils of roughly 60% of their central government funding, leaving them expected to deliver ambitious net zero commitments with a fraction of the resources they once had.
Professor Mark Davis, in the School of Sociology and Social Policy at the University of Leeds, had already been looking at the problem from a new angle. Research funded through a government grant, and now continuing with University of Leeds Impact Acceleration Account (IAA) funding, has breathed new life into a model of municipal finance and turned it into one of the more unexpected net zero success stories of the last five years.
Impact
- Knowledge discovery: rediscovered and modernised municipal investing, a UK practice that had disappeared for around 30 years, and co-created a new financial product allowing residents to directly fund local green and social projects in their area.
- Economic and policy impact: the model, known as Community Municipal Investments (CMIs), has been adopted by 19 councils and one combined authority, raising £30 million to date, with a national campaign now underway to scale it further.
Key information
- Major funders: ESRC Impact Acceleration Account (IAA); UK Government (Financing for Society project, 2017-2019)
- Partners and collaborators: Green Finance Institute; Abundance Investment; Local Partnerships; Unity Trust Bank; Esmée Fairbairn Foundation; West Berkshire Council; Warrington Borough Council; Sheffield City Council; Greater Manchester Combined Authority
- Disciplines: economic sociology, public finance, climate policy
- Investigators: Professor Mark Davis, Dr Emma Hyde.
Reviving a forgotten practice
Municipal investing – where local authorities borrow directly from the public rather than only from central government or financial institutions – was once a well-established part of UK local government finance. It fell out of use just before the internet era, when the paperwork needed to administer it became too expensive relative to its popularity, and it largely disappeared for three decades.
Davis’s research, originally funded through a government grant for the “Financing for Society” project, set out to explore the potential of crowdfunding in the public sector more broadly. That work identified a real opportunity: bring municipal investing back, adapted for a digital age.
The model his team developed, Community Municipal Investments (CMIs), allows a council to issue a bond that any resident, or member of the public more widely, can invest in from as little as £5 – earning a rate of return comparable to a cash ISA, typically over five years with regular repayments.
The structure does two things at once. It gives the council a low-risk, stable source of finance it wouldn’t otherwise have – usually up to £1 million per raise, though some councils have gone as high as £5 million across several tranches – and it turns fundraising itself into a way of engaging residents directly in what the council is doing, initially on climate projects and increasingly across social ones too.
Critically, investors are betting on the council’s continued existence over five years, not on any individual project’s success – an important piece of social innovation that keeps risk with the institution best placed to manage it.
From pilot to national campaign
The model launched during the COVID pandemic with two deliberately contrasting pilots: West Berkshire, a rural, southern, Conservative-led council, and Warrington, an urban, Labour-led northern one. Both raised their £1 million targets ahead of the closing date, establishing that the model could work across very different political and geographic contexts.
Since then, sometimes brought to market wrapped as “Local Climate Bonds” and championed nationally by the Green Finance Institute, the CMI model has been taken up by 19 councils, raising £30 million in total – including £16 million in institutional capital from Unity Trust Bank and the Esmée Fairbairn Foundation, which helps underwrite council risk.
In 2023, Greater Manchester became the first combined authority to commit to issuing a loan or bond using the model, when the initiative was championed by then-Mayor Andy Burnham as part of a wider devolution agenda around empowering local authorities to drive growth and improve places.
While GMCA gets ready to launch, Sheffield became the first Northern metropolitan district council to launch one, and conversations are now underway with other towns and cities across the north of England.
Making the case to scale further
The current IAA-funded work is aimed squarely at building the evidence base needed to take the model further.
Professor Davis and colleague Dr Emma Hyde are writing one of two impact assessment reports, published in partnership with the Green Finance Institute: a technical report for council finance officers assessing five years of financial due diligence – confirming the model saves councils money compared with their usual route of borrowing through the Public Works Loan Board – and a second report on the model’s non-financial impact, covering the social and community benefits councils gain by delivering visibly on their civic mission.
Both reports are due for publication in September, timed to reach the UK Government’s Devolution Office ahead of the Labour Party conference, with the aim of building the political case to scale CMIs well beyond the councils that have adopted them so far.
As Mark Davis puts it: “This model shows that councils benefit when they engage their residents directly in projects with civic ambition – and that residents will invest in their own community’s future if you give them a fair, transparent way to do it.”
What began as research into an all-but-forgotten corner of council finance has become a live policy tool – one that gives residents a direct, financial stake in improving the places they care about most.
This project was sponsored by the UKRI Impact Acceleration Account.