The London Green Fund – a JESSICA Holding Fund Frank Lee JESSICA and Investment Funds division, European Investment Bank Brussels, 29 November 2011

The London Green Fund The London Green Fund (a JESSICA holding fund) established in late 2009 to invest in carbon reduction projects in line with the Climate Change component of the London Plan Focused on energy efficiency, waste and decentralised energy as the “3 biggest carbon reduction opportunities for London” Governed by representatives from the Greater London Authority, the Environmental Agency and the London Waste and Recycling Board. The Mayor’s environmental advisor sits on the Investment Board London Waste & Recycling Board £32m £32m £50m London Green Fund £100m* Managed by EIB £35m £50m Waste Urban Development Fund Energy Efficiency Urban Development Fund Private finance Private finance Equity type investment Loan type investment Min £35m Min £50m Low risk High risk Urban Projects Urban Projects * £15m remains available for further investment Aiming to deliver outputs/impacts on job creation, tons of carbon saved, and minimum energy usage savings 2

London Energy Efficiency Fund A GBP 100m UDF designed to provide low cost loan financing for retrofit and low carbon heating projects in local authority, university, hospital, social housing and other public buildings (either directly or via ESCOs). Low cost financing in exchange for carbon reduction benefits Insulation Building management technologies As a provider of cheap debt, return expectations for the fund are low, but the private sector finance provider still makes a commercial return, and the fund manager is incentivised to maximise carbon reduction and energy efficiency impacts A key challenge for London is making the existing public building stock more efficient – this is predominantly government and council buildings, hospitals, and universities but also extends to museums and gardens like Kew who have numerous buildings as well as trees! How it works: The public sector building owner identifies a portfolio of buildings they would like to retrofit, sets a target % energy savings e.g. 25% and a payback period e.g. 7 years They select and ESCO from our RE:FIT supplier framework to carry out the works and to financially guarantee the savings. IF the targeted 25% is not achieved over the 7 years then the ESCO pays the difference Hence it is a cost neutral means to reduce energy bills and carbon footprint of buildings. If all municipal buildings, schools, universities and hospitals were retrofitted, it could save 1 million tonnes CO2me seeks to overcome these barriers and accelerate the retrofitting of London’s public sector to deliver on London’s CO2 Cooling equipment Low carbon heating 3

London Energy Efficiency Fund Amber Infrastructure –Fund Manager Leading JESSICA fund manager; LEEF, Wales, Scotland FSA regulated infrastructure investor and manager in PFI/ PPP Project appraisal and financial structuring Independent Investment decision making Arup –Technical Advisor Project sourcing and pipeline development Assistance and guidance on accessing LEEF Technical due diligence pre-investment Project monitoring post investment RBS –Funder Expertise in public sector and green finance Provider of match funding to public investment Identification and appraisal of projects Credit risk assessment, pricing and structuring

Investment Strategy Output targets: £1500/tonneCO2 20% carbon dioxide saving 20% energy saving •Eligible technologies: Building energy efficiency Building integrated low and zero carbon technologies •Any locations within 33 London Boroughs: •Borrowers can be public, private or JV entities •Broad definition of „Public Sector Building‟ •Open choice of procurement and delivery routes; RE:FIT and EPC optional

RE:FIT building energy efficiency programme The public sector building owner identifies a portfolio of buildings they would like to retrofit, sets a target percentage energy savings and a payback period Energy Performance Contracting approach: An Energy service companies (ESCos) carry out the works and guarantee the resulting energy savings This guarantees the payback of the initial investment with the delivery risk transferred to the ESCo. Hence this is a cost neutral means to reduce energy bills and carbon footprint of buildings RE:FIT BUILDING ENERGY EFFICIENCY FOR TOMORROW

Eligible Expenditures Typical ECMs Variable speed pumps and fans PC shutdown software Voltage optimisation Insulation Draft proofing Lighting upgrades & controls Building Management System Controls and strategic review Heat recovery Boiler replacements Combined Heat & Power Solar thermal Photovoltaic cells 1E Nightwatchman software for PC auto shutdown 7

Contact details: Jessica@eib.org; lee@eib.org LONDON GREEN FUND Contact details: Jessica@eib.org; lee@eib.org