South Gloucestershire Council’s Investing in Climate and Nature Scheme

The South Gloucestershire Investing in Climate and Nature (ICaN) Scheme is an innovative program which supports a range of projects that enhance public open spaces to deliver nature recovery, climate resilience and improved community wellbeing. The key objectives of this program include increasing the natural capital of these areas providing valuable environmental benefits such as cleaner air, better flood and drought protection, temperature regulation and carbon storage. The other objectives include creating more accessible, high-quality green spaces that support mental and physical health, social connection and overall quality of life.

During these challenging times of economic uncertainty when local councils are facing increasing financial pressures and reduced public funding, the ICaN scheme offers an innovative solution by attracting private investment to deliver public value. The scheme enables councils to unlock alternative funding sources by supporting environmental and community focused projects to become investment ready propositions. This would support long-term climate and nature goals without relying solely on already constrained public budgets.

For businesses and investors, ICaN provides a credible opportunity to meet Environmental, Social and Governance (ESG) commitments while contributing to measurable, place-based outcomes. This approach helps bridge the funding gap for local authorities while ensuring the ongoing delivery of climate adaptation, biodiversity and community resilience benefits.

Challenge

South Gloucestershire Council is launching the Investing in Climate and Nature (ICaN) Scheme through support from the Natural Environment Investment Readiness Fund (NEIRF). ICaN scheme aims to attract philanthropic donations to enhance local green spaces, using an online platform and a natural capital accounting-based evaluation tool to demonstrate measurable returns through improved ecosystem services, climate mitigation, resilience and adaptation.

With support from SWLNZ (Southwest Local Net Zero Fund), the council explored the potential to expand ICaN’s scheme scope to include building decarbonisation, specifically focusing on the installation of heat pumps in council-owned schools and community facilities. These buildings were prioritised due to their high potential for decarbonisation and cost savings, their strong community significance and their broad positive impact on end users.

This feasibility project focused on assessing the viability of incorporating scope 4 avoided emissions — indirect emissions reductions resulting from the displacement of more carbon-intensive activities — as a novel investment incentive. Key project outcomes include:

• Assessment of scope 4 avoided emissions as a credible and valuable mechanism for encouraging philanthropic and impact investment in decarbonisation initiatives.
• Development of a modelling tool to estimate likely carbon reductions from heat pump installation in schools, applicable across different settings.
• Modelling results from five sample council-owned schools, quantifying potential emissions reductions and energy savings.
• Recommendations for expanding this methodology, improving the investment case and integrating building decarbonisation into the broader ICaN platform.

This work creates a new model for combining building decarbonisation and green space improvements, helping South Gloucestershire Council unlock private investment to support faster local climate action.

Action

A £25,000 grant from SWLNZF supported a study led by Eunomia Consulting to explore whether scope 4 avoided emissions could be used to incentivise donations towards school decarbonisation projects. The study also developed a method for estimating carbon savings based on schools' physical characteristics.

The remaining grant will support the:

• development of the ICaN website and
• the creation of promotional materials for decarbonisation projects.

Ideally, the study would also have considered:

• maintenance cost savings,
• mitigation of fuel price volatility risks and supply disruptions through reduced fossil fuel reliance,
• quantifiable user benefits: improved attendance, learning outcomes, health and wellbeing and
• reduced cascading effects: absence from school, less parental leave and increased productivity.

The study concluded that scope 4 avoided emissions could incentivise donations from businesses. However, even over a 15-year period, the cost per tonne of carbon savings was significant compared to other carbon projects. This could limit attractiveness. In response to this problem:

• PSDS (Public Sector Decarbonisation Scheme) grant funding for each school was subtracted from the ASHP replacement capital cost.
• The counterfactual cost of replacing boiler systems on a like-for-like basis was subtracted from the capital costs.
• An additional discount of 20% of the remaining cost was also applied, representing available SGC contribution.
• The resulting cost effectiveness was recalculated over a similar 15-year period.

Distillation to the minimum donation needed to enable the ASHP option improves the cost effectiveness and presents a more attractive offer in terms of £/tCO2e. Doing so does not affect the ability for the donor to claim the entirety of the avoided emissions.

Outcome

The following are the key findings, cost effectiveness and finding strategy for building decarbonisation projects:

Variation in cost-effectiveness: modelling shows significant differences in cost per tonne of carbon savings across five schools. Projects replacing oil-based heating systems offer the best value, while those replacing gas are less cost-effective.

Comparison to voluntary carbon market: even over a 15-year period, the cost per tonne of avoided emissions remains significantly higher than prices seen in the voluntary carbon market. This may deter funders focused solely on carbon savings.

Wider co-benefits: despite high carbon abatement costs, projects offer broader benefits — such as improved student attendance, learning outcomes and staff wellbeing due to better indoor environments — which strengthen their investment case.

Strategic fundraising approach: targeting fundraising to cover the cost difference between a like-for-like boiler replacement and an Air Source Heat Pump (ASHP) system allows donors to claim carbon savings at a fraction of the total cost.

Viability for ICaN portfolio: this funding model supports inclusion of building decarbonisation projects within the ICaN project portfolio promoted through the ICaN website. With typical costs prohibitively in the region of £500k to replace a school boiler with an ASHP, the focus of such projects would be buildings where most, but not all, the funding is in place.

Alternative interventions: lower-cost measures (eg insulation, smart controls, upgraded windows/doors) may offer more attractive carbon-saving opportunities and should also be prioritised where appropriate.

Reflection

It is evident that a whole cost scheme to replace traditional boilers with an ASHP unit would be unlikely to attract philanthropic donations due to the large sums of money needed. The scope 4 incentivisation would be insufficient to overcome the scale of the funding target. Typically, crowdfunding and philanthropic appeals work best when targets are below a £100,000 threshold. In some circumstances a sum of below £100k may genuinely make the difference between an ASHP and a like-for-like boiler replacement. More research to better understand and quantify the additional associated end user benefits and reduce cascading effects, would help build the appeal.

Moving forward, it may be possible to identify smaller community buildings (libraries, community halls, meeting rooms) where conversion to ASHP required significantly less capital but would still return good carbon savings. Even in these cases, the most attractive propositions will be schemes where some, or most, of the funding is in place and donors are asked to make up the difference.

If resources allowed, it would be good to understand more about whether alternative carbon saving measures (insulation, windows and door replacements and smart heating controls) would generate attractive carbon savings at a fraction of the cost of ASHP – a better £/tCO2e outcome. If so, the scope 4 incentivisation approach might be more effective if based on these types of measures and the ‘making the difference’ rule, in terms of the philanthropic donations needed, would still apply.

15 October

Contact information

David Tibbatts

ICaN Scheme Manager

Email: ican@southglos.gov.uk
Phone: 01452 862 992