Tuesday 5 October 2010Alex ConwayEuropean Programmes DirectorLondon Development Aegncy

Implementation of the London Green Fund - synergising economic, environmental and European objectives

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“I am delighted to support this initiative that will help London to

be the world’s leading big low carbon city.”

Martin Powell, London Mayoral Advisor, Environment

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Strategy Economic Principles

Promote London: world capital for business (ERDF)

Improve London’s competitiveness (ERDF)

Transforming to a low-carbon economy (ERDF-JESSICA)

Extending economic opportunity (ESF)

Investing in London’s future (Transnational)

Mayor’s Economic Development Strategy

Strategy Objectives & linkages to EU Programmes

Economic Development Strategy & London Plan

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The London Plan

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Thames Gateway & Green Enterprise District

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Key

Brownfield sitesLand in public

ownership

Enterprise District Brownfield Sites

and Publicly Owned Land

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Climate change: London is committed to playing its part

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London Mayor’s Climate Change

Target

Today 2020 2025 2050

•Reduction in greenhouse gas emissions by 60% below 1990 levels by 2025

UK Climate Change Act (2008)

• Reduction in greenhouse gas emissions by 80% below 1990 levels by 2050.

European 20-20-20 Target (2009)

• Reduction in greenhouse gas emissions by 20% below 1990 levels by 2020

• 20% increase in renewables

• 20% cut in energy consumption

The Mayor is committed to London becoming the greenest city in the world and a city that becomes a world leader in improving the environment.

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London‘s 2007-13 European Regional Development Fund (ERDF) Programme

• Mayor of London has Strategic Oversight and Chair of Programme Monitoring Committee (PMC)

• Small London-wide ERDF programme - €182m

– Priority 1: SME innovation, research, promoting eco-efficiency €50m (revenue)

– Priority 2: Access to new markets and finance for SMEs €52m (revenue)

– Priority 3:Sustainable places for business €73m (capital)

– Priority 4: Technical Assistance €7m

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‘JESSICA’ in London

• London undertook to investigate the opportunity for using ‘Joint European Support for Sustainable Investment in City Areas’ (JESSICA) in relation to delivering up to 70% of Priority 3.

• Deloitte undertook study – supported by EIB and EC - that:– concluded that strong case exists for using JESSICA initiative in

London

– indicated that there was sufficient ‘deal-flow’ of projects in London to meet ERDF requirements

– recommended that focus should be on decentralised energy systems and waste infrastructure projects

– recommended use of the ‘holding fund’ model

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JESSICA= good idea = London Green Fund

• Entire region is urban area, geographic eligibility issues don’t arise;

• Mayor’s London Plan and sub-plans meets requirement for an ‘integrated plan for sustainable urban development’;

• JESSICA meets Mayor’s objectives re tackling climate change,

• Funds can be recycled and returns generated reinvested in any urban regeneration project;

• Promotes closer working with European Investment Bank;

• Exciting opportunity to do something genuinely innovative with ERDF;

• Let’s call it ….the London Green Fund!

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London Green Fund’s place in finance landscape

London Green Fund should be targeted at those projects that just fail to be ‘commercial’ and provide necessary equity, loans or guarantees to encourage other investors to fund projects.

GrantLondon Green Fund

Commercial

Increasing commercial viability

• High risk, with little market demand evidence or funding security

• Returns are ‘non-financial’

• Outputs essential to economic development policy

• Lack of alternative funders

• Fluid risk profile and little or no robust market demand evidence

• Requirement for long term debt and equity, or additional funding security or guarantees are required

• Returns are longer term or do not match commercial needs

• Clear and understandable risk profile

• Strong rationale for commercial funding to be made available

• Normal levels of commercial return that commensurate with risk of project

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EIB€35m cash

Match funding

LondonWaste and Recycling

Board

Energy Efficiency UDF

Waste UDF

Investment Board

Land€35m

€54m ERDF €20m€109m

€70m

€39m

PPP/Urban Projects

Delivery Model

Land cash

LDA&

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London Green Fund

Influencing national policy / stakeholder management / communications

Olympic Fringe

Energy Efficiency Energy Supply Waste Adaptation

Homes Energy Efficiency

Programme

Better Buildings Partnership

Building Energy Efficiency

Programme

Low Carbon Zones

Green500

Green Enterprise

District

Retrofit Academy

London Mayoral Strategies

London Waste Strategies(municipal &

business)

LDA Owned Energy Supply

Projects

Crystal Palace CHP

London Thames Gateway Heat

Network

Royal Albert Basin

Energy Master Planning

London Waste and Recycling Board

Park Royal Partnership

London Plan (Autumn 2009)

Economic Development

Strategy

Green Jobs & Skills

Low Carbon Economy Action

PlanLDA Contribution to Energy Supply

Projects

LDA climate change programmesS

trate

gy

Delivery

Climate change, mitigation and

energy strategy

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Spatial and Public Realm

Strategy

Trees and Parks Programme

East London green Grid

Low Carbon Economy

Mayor’s Green Procurement

Code

1414

Building Energy Efficiency Programme: ‘RE:FIT’

• cost neutral means to reduce energy bills and carbon footprint of your buildings

• Energy service companies (ESCOs) guarantee a set level of energy savings - therefore financial saving - over a period of years

• This guarantees a future income stream to fund investment in improvements

Insulation Building management technologies

Cooling equipmentLow carbon heating

• If all municipal buildings, schools, universities and hospitals were retrofitted, could save 1m tonnes CO2: 2% of London’s CO2 emissions

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London Thames Gateway Heat Network

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London Waste and Recycling Board – waste objectives

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Bridging the Gap

Demonstration or Pilot Projects

Aggregated Project Investment or

Asset Value £’m

Time

Commercially Viable Projects

London Green Fund

Public Green Bonds

Socially Responsible

Funds

Senior Debt

Phase I

€109mill

Phase II

€2.4bn

Phase III

€24bn

Phase IV

£47bn

2010 2011 2015 2020

Green Investment Bank

Private Equity

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Challenges

• Delivering large-scale carbon reductions requires huge upfront investment

• This investment has to payback in commercially-attractive timescales and be no more risky than investment in other asset classes

• Public sector seed funding does not catalyse the market

• Private sector investors not willing to invest in the Fund

• Private sector funding does not come in at sufficient pace

• Potential slow decision making in selecting projects for funding

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Achieved so far

• 2009

–Holding fund management agreement signed with EIB

–Investment Board set up to oversee investment

• 2010

–EIB issued calls for Expression of Interest to establish two Urban Development Funds (UDFs)

–Fully-funded with cash

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London Green Fund Timelines

2009 2010 2011 - 2015

Mayor launches Fund

Waste UDF established DE/EE UDF established

No

vem

ber

Ma

rch

2

011

End of Initial Investment period

Waste UDF commences investment in projects

Janu

ary

2

011

DE/EE UDF commences investment

in projects

Ma

y 2

011

De

cem

ber

20

15

Investment Board Formed

De

cem

ber

20

09

Aim : To make London one of the world’s leading low carbon

capitals by 2025 and a global leader in carbon finance.

(Mayor’s Economic Development Strategy for London)

Contacts

Alex ConwayEuropean Programmes DirectorLondon Development AgencyTel: +44 (0) 207 593 8149email: alexconway@lda.gov.uk

Martin Powell, Mayoral Advisor, Environment, Greater London Authority

London Green Fund: www.lda.gov.uk/our-work/european-funds/ERDF/jessica/

Mayor of London website: Economic Development Strategy, London Planwww.london.gov.uk

Thank you