England’s £10m catalytic fund to ‘show others how green finance works’

Charities, businesses and local authorities in England can apply for grants of up to £100,000 to get nature projects ready for private investment.

The £10m Natural Environment Investment Readiness Fund (NEIRF) aims to create a pipeline of projects for the private sector to invest in, and to develop new funding models that can be replicated elsewhere. This would “demonstrate the UK’s leadership in nature finance”, according to a statement from the Department for Environment, Food and Rural Affairs (Defra), ahead of the UN’s COP26 climate change conference in Glasgow in November. 

Delivered by the Environment Agency, a public body, on behalf of Defra, the fund will help organisations get specialist advice, engage investors and build capacity to develop their project to the stage when it is ready to receive and repay investment.   

Emma Howard Boyd, Environment Agency chair, tweeted that NEIRF would both support projects that enhance nature and help prepare for climate shocks, and “show others how green finance works”.  

Projects need to be replicable and scalable, said Defra, with lessons learned made public to encourage similar approaches to access private sector finance for nature projects in future. Examples of eligible projects include the creation of new woodlands or new coastal wetlands, or the restoration of river catchments.

The fund is open for applications until 26 March 2021.

Getting the deal done

HM Treasury, Natural England – a public body that advises the government on the natural environment – and the Access Foundation for Social Investment contributed to the fund’s design.

The Access Foundation had shared experience with those developing the fund on how to boost investment readiness and on the need for flexibility in programme design, CEO Seb Elsworth told Pioneers Post. Focusing capacity building work “on very specific things that will help get the deal done” was important, such as how to present the opportunity in a way “to get the investor comfortable”.  

While the new fund is open to applications from charities and social enterprises, Elsworth said the scale and type of projects it will fund mean it is likely to attract multi-sector bids. 

There are many important nature-based projects that, with technical assistance and catalytic funding, could secure private capital to help them achieve their missions

Environment minister Rebecca Pow said the government’s 25 Year Environment Plan had made the case for private sector investment, alongside public investment, to protect the environment.

“Investors are rightly recognising environmental factors as key drivers of value. As we look to build back greener from the pandemic, I would encourage any interested businesses, local authorities, NGOs or other organisations to bid for a portion of this fund.”

Dr Rhian-Mari Thomas, CEO of the Green Finance Institute, a government-backed organisation set up in 2019 and which is supporting the NEIRF application and awards process, said: “There are many important nature-based projects that, with technical assistance and catalytic funding, could meet investor requirements and demand, and secure the private capital to help them achieve their missions. The NEIRF will serve as an essential bridge, as well as providing an example of how to build an investment pipeline for nature.”  

Need for profit

Some social enterprises have raised concerns about the possible implications of raising private investment. The application requires potential grantees to describe, among others, “how the revenue or cost savings produce a return for an investor” and “the scale of investment your model is likely to attract, including evidence and timeframes”. 

Michelle Kent, co-founder of 9 Trees CIC, which plants nine trees per year for each of its individual subscribers to balance their carbon footprint, welcomed the funding, saying “new, innovative ways to reconnect people and wildlife need to be considered”. However, they said that the focus must be on “innovative ways to create nature without the need for profit”. 

A Defra spokesperson told Pioneers Post it was “up to applicants to identify the best sources of private investment” for their projects, and that its analysis had found that the domestic natural capital investment market was “underdeveloped and needed support to generate a sufficient pipeline of investible projects”. 

The spokesperson added: “Our 25 Year Environment Plan made clear that while the public sector will continue to be a central source of funding, it is critical that this is alongside more private sector investment to protect and enhance our natural environment.

“The focus of the NEIRF is to develop capabilities and produce a pipeline of business or project models which are ready for investment. It will not provide funding for projects on the ground, ie, it will not pay for tree planting or flood risk management. The NEIRF will pay for the development of project models which go on to secure private investment; some, however may be suitable for other government grant funds.”

• Yesterday the UK government also announced a £10m investment in a new national green finance research centre – with physical hubs in London and Leeds – that will advise lenders, investors and insurers. It will be led by the University of Oxford and will provide data and analytics to help financial institutions and services consider the impact of their decisions on the environment and climate change.

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