Attracting investment to achieve our net zero ambitions

It was a pleasure to attend the East of England Local Government Associations’ Net Zero conference on Wednesday. It was a well attended, wide ranging and informative event covering investment, design, transport and behaviour change. I was on a panel addressing the problem of how to attract investment to achieve net zero ambitions. I made the following remarks on the panel talking about investment, revisiting one of my common themes – how to bridge the development gap between ‘here’s a good idea’ and ‘here’s a high quality financeable project’.


Good morning, it’s a pleasure to be here in Cambridge addressing the important topic of achieving investment to deliver net zero ambitions. That is something that I, and the rest of the ep team spend a lot of time thinking about and working on.

It is clear that getting to net zero requires a huge amount of investment. It is true that behaviourial issues are important but fundamentally this transition is about investment – investment in transforming our infrastructure from being based on fossil fuels and combustion to renewable electricity and energy efficiency. It is on a scale equivalent to the industrial revolution, and when historians look back in a 100 years it will be seen like the industrial revolution.

So how much investment is needed? The Climate Change Committee say £50 billion a year up until 2050.

What is clear is that this level of investment cannot come from the public sector alone. We have to access institutional capital.

At the same time as we are addressing net zero within local government and companies, we are seeing a revolution in finance, one in which the finance sector is being driven by regulation and customer pressure to invest in a more sustainable way. We see this in things like the EU Taxonomy and TCFD forcing financial institutions to look at climate related risks. Just like businesses and local governments, the financial institutions are trying to work out how to make the transition towards net zero. You can be cynical, and probably should be cynical, about some of it because ‘there is greenwashing’ – but make no mistake there is a fundamental shift in the finance sector towards net zero, ESG and sustainable finance.

So on the one side you have a big potential for energy efficiency, distributed clean energy, storage, and flexibility services – and on the other side you have a lot of money that wants to invest in this stuff. What is in the middle, what stops capital flowing?

There are many many barriers, particularly for energy efficiency, but the biggest one is the one I call the development gap. That is how do you go from ‘here is a good idea’ to ’here is a quality developed project that can actually be financed and delivered?’. This is a huge gap which has only really been recognized in the recent past, and an area we are beginning to see progress.

One of the things about developing projects, whether it be energy efficiency, renewables, a new wind farm, a new building, or a new car, or a new aeroplane, is that it is risky. You don’t know with certainty what the outcome will be. That development risk requires a different kind of capital to the institutional capital that flows into actual infrastructure projects which is all about achieving low risk and relatively low but safe returns.

At ep we work globally and we’ve spent the last ten or more years looking around the world at examples where countries or regions have scaled up investment into energy efficiency and decentralised energy and we came up with a simple model – something I call the jigsaw of energy efficiency financing.

There are 4 pieces to the jigsaw:

– Finance – both development and project finance – two very different kinds of capital but both essential
– Pipeline – capital needs to be deployed at scale and so there is a need to build big pipelines by aggregating a lot of small projects. Many of the projects we are talking about are individually tiny by the standards of institutional capital. There is also a need for better business models and business cases that stress multiple benefits to make the proposition more attractive – which helps build pipeline.
– Standardisation – you can only have capital deployed at scale if there is standardisation and that means standardisation of everything, the development process, the technologies, the underwriting processes, the contracts – everything.
– Capacity building – that means for the customers, for the supply chain and for the finance sector.

You can put these four elements together in different ways under different structures – private, public, hybrid, super-ESCOs, procurement frameworks, investment funds. etc. We’ve come to the conclusion that it really does not matter how you put them together but you absolutely need all four to be in the same place at the same time.

One of the ways we are applying this model in real life is the Net Zero Delivery Vehicle. ep has partnered with four local authorities, Essex County Council, Surrey County Council, Kent County Council, and Brighton & Hove City Council and applied for IUK funding to launch the Net Zero Delivery Vehicle, the NZDV. The NZDV will be focused on bridging the development gap. We will see whether our IUK application is successful but if we can get the NZDV funded we think it can develop and deploy c.£100m of capital or more over the next few years.

So in summary:

– We cannot get to net zero without mobilizing private capital at scale
– We need to blend public and private capital
– The biggest need is to fill the development gap
– The development gap is difficult to fill with private capital and is a perfect role for public money to catalyse private investment
– You need all four pieces of the jigsaw to be brought together (USE JIG SAW PROP):
o Finance – development and project
o Pipeline – scale
o Standardisation
o Capacity building for customers, suppliers and finance sector.

Thank you and I look forward to the discussion.


Ironically the event happened at on the day Rishi Sunak announced the watering down of net zero policies. There was a sharp contrast between the leadership being shown by local governments and other organizations, and the lack of leadership being shown by the Prime Minister. I was reminded of a piece I wrote in 2019 (link) and the quote by Ghandi. ‘The future depends on what you do today’.

Following the leaking of the government’s changes in policy I saw that one tabloid had the headline ‘net zero, the tide has turned’ which was clearly an approving headline. Personally it looks to me that the tide is flowing and accelerating – in favour of net zero with more and more investors and organizations, public and private, committing to serious action. Rather than turning the tide the PM is likely to be more like King Canute.