Build consensus early on
Setting up and implementing the bond ran smoothly with few hurdles. Early on, there was some doubt from opposition councillors. Warrington is a Labour-held council with a healthy Liberal Democrat and Conservative opposition. The wisdom of launching a bond when the council was focused on fighting the Covid-19 pandemic was questioned. However, once the financial details were fully explained, councillors became supportive. Warrington’s example proves that a community municipal bond can be a tool for a just, fair and green recovery. Moreover, even during the hardship of the pandemic the target of £1m was comfortably reached, testifying to the importance local people give to taking on the climate emergency.
Emphasise the local benefits
The council is considering more bonds to finance future projects. But it would like more local buy-in and to grow the number of residents contributing. Abundance handled the communications for the first bond, but more council involvement in communication and media strategy could push the local green benefits of the bond, ideally getting more people on-board at an earlier stage.
Be aware of any financial risk to the council
Funding struggles are one reason why these bonds may appeal to stretched local authorities. But for investors, risk is tied to the continued existence and financial strength of the council. Any councils at risk of a Section 114 notice being issued due to failure to balance budgets – a legal order that restricts their spending – will be unable to implement a community municipal bond. Abundance credit checks councils to ensure that investors aren’t lending to authorities at risk.
For financially sound councils there is still risk to consider. If there are serious project complications or setbacks, they will carry the risk as opposed to investors.
The Council identified how to de-risk the investments and explore a commercial approach through the use of special purpose vehicle.
Can this be replicated by other councils?
The success of the pilot in Warrington led the Green Finance Institute and Abundance to launch a national campaign in July 2021 to help local authorities set up community municipal bonds. The Institute is targeting all 404 local authorities in the UK. In September 2021 five councils signed the Local Climate Bond Pledge, committing to issuing a bond by Summer 2023.
Spending possibilities for community municipal bonds include making homes more energy efficient, installing charging points for electric vehicles or rewilding and tree-planting projects.
Bonds could be used to engage and protect vulnerable communities or boost green skills and jobs – they are flexible and can be moulded to specific council objectives.
Authorities might feel they lack the knowledge and experience to launch a similar bond, but the concept is simple and straightforward. The University of Leeds team have produced a local authority crowdfunding decision-making flowchart to help councils determine whether a CMB is right for them.
A bond like this is easier than you might think. Abundance really do know what they’re doing. It's a way of trying to get local buy-in for residents to understand what the Council is doing and for residents to be able to invest back into their own services. It really is about that mutual benefit.
Lynton Green, Deputy Chief Executive and Director of Corporate Services at Warrington Borough Council