Regional Net Zero Funds

Blended Finance Regional Funds for Net Zero

Insights summary

Local and Combined Authorities are increasingly considering regional funds as a route to accelerate Net Zero delivery. The Blended Finance Regional Funds for Net Zero insight, developed under Innovate UK’s Net Zero Living programme, outlines how such funds can be designed and operated to mobilise capital at scale for local climate priorities as well as case studies to show how it has been done in practice.

A Regional Net Zero Fund is defined as a structured pool of capital deployed into projects within a specific geography, with Net Zero as its central purpose. The distinctive feature in this case is the use of blended finance, where public investment is strategically applied to attract additional private capital. This model increases the resources available for projects across different sectors such as energy, transport, real estate, waste and agriculture, while ensuring alignment with local policy objectives.

The report explains how funds are typically structured. A clear mandate sets the sectors, themes and risk profile. Capital can be deployed through a range of instruments, including grants, loans, bonds and equity, allowing different counterparties such as businesses or projects to be financed. Governance arrangements ensure transparent decision making, while management and administrative fees cover operational costs. Local Authorities may take different roles, from convenors to active developers, but their involvement is vital to align stakeholders and initiate the fund development process.

Illustrative case studies demonstrate the model in practice. The London Energy Efficiency Fund, the Mayor of London’s Energy Efficiency Fund, and the Green Growth West Fund show how public cornerstones, specialist fund managers and blended structures have delivered investment into regional pipelines.

Key Findings

• Three preconditions for viability: cornerstone investor, credible fund manager and investable pipeline.
• Technical assistance and advisory support are essential to bridge the “valley of death” in project development.
• Case studies demonstrate effectiveness, showing how regional funds have successfully mobilised blended capital for Net Zero.