Climate Action Finance

Climate Action Finance

This page is about how to finance capital improvements to churches and other buildings, in order to save energy and greenhouse gas emissions.

Climate Action Finance is needed in support of the Diocese of London’s Climate Action Projects, for example solar panels, biomass heating and heat pumps.

Our aim, in common with the rest of the Church of England, is to reduce the carbon emissions of the Diocese and churches to net zero by 2030.

Principles

The primary motive for a Christian church to reducing energy consumption, improve the energy efficiency of its buildings and install renewable energy should be care for God’s Creation.

Stewardship of scarce resources, especially the gifts of a congregation, in pursuance of the Church’s Mission is an important consideration;
Stewardship of energy and care for Creation are key aspects of Mission in themselves.

Financial viability may influence whether a scheme can go ahead. However, so long as the capital can be raised and repayments made on time, yielding a return over and above that might not be the main incentive.

Project Finance

Project finance requires both capital to pay for works, and income for interest and paying back instalments on capital.

Capital may be sought from grants, bank loans, the Carbon Trust, loans from the Diocese, Area grants or loans or community schemes. Owners including churches may form cooperatives with each other, to share and potentially reduce costs; some parish trusts may contribute;
Some schemes work on the ‘pay as you save’ principle – the savings in outgoings by saving energy support repayments. The government’s Renewable Heat Incentive and Smart Export Guarantee (see below) may also assist.

Always bear in mind VAT, and fuel costs.

Before you start

It’s important to seek advice from the Diocese before making any grant applications, in order to avoid competing with other churches or the Diocese itself.

Contact the Head of Development, and see Area Finance Advisors.

Grants

Grants are harder to come by than they once were, though some sources may still be open.

Your local authority may well have a grants fund for environmental and energy-saving projects, part of their effort to tackle the climate crisis and reach net zero within their area.

Here a few more:

Some grants sources are public or government funded. Projects taking grants from public funds such as the Heritage Lottery Fund are ineligible for subsidies like the Renewable Heat Incentive, and even for the Smart Export Guarantee even though that isn’t a subsidy, it’s a payment for electricity generated. For larger amounts, the Heritage Lottery Fund may also require carbon footprinting of associated utilities consumption and travel.

Community Energy

London Community Energy Fund

This scheme run by the Mayor and Greater London Authority offers grants to community organisations including churches.

See London Community Energy Fund.

Local Community Energy schemes

There are a host of local community energy charities, not for profits and cooperatives with whom partnerships may be possible, or who may offer grants.

Community Energy London.

Community energy schemes have been developed with the aim of harnessing income from renewable energy to drive local regeneration.

It is well to be prepared and ready when such offers come along, to react in a very short timescales!

There are issues to be worked through first, such as:

Scale. A single church or church hall may be too small to support installations of the necessary capacity. The principle of community cooperation implies that groups of organisations and buildings or householders are contributing. It’s worth sizing up the potential for such a collaboration in your area;
Ownership. Is it a precondition that any installations, e.g. solar panels, will be cooperatively owned? Any church under the faculty jurisdiction will need permission from the Diocesan Chancellor for the terms and conditions proposed. In the case of a church hall or other property under trust, the consent of trustees and in many cases the London Diocesan Fund will be required;
Is the funding a grant, or a commercial loan on a ‘senior’ or ‘mezzanine’ basis (which can mean a charge on a property)? It is not possible to place a charge on premises subject to the legal effects of consecration.
Assignment of income. There may be a requirement for Feed-in Tariffs, and/or savings in purchased energy costs to be recycled for community benefit. A church will need to be satisfied that its own resources are being stewarded appropriately, against the value of its contribution to the common effort
Viability. A realistic assessment of long term income and outgoings, the return on capital and the surplus expected for ‘recycling’ is essential as a valid basis to go forward. Any interest payments must be taken into consideration.

Nevertheless we want our churches to play our full part, and to take advantage of appropriate initiatives.

Incentives to On-Site Generation

Feed-in Tariff

The Government’s Feed-in Tariff (FiT) was closed to new entrants at the end of March 2019, with a further year for those who had pre-registered.

Premises already benefitting from the Feed-in Tariff are also promised that this will continue for the period guaranteed on entry.

Smart Export Guarantee

This scheme requiring most electricity suppliers to offer a tariff for payment for electricity generated on site and exported to the national grid, replaced the Feed-in Tariff; it came into force in 2020. See Smart Export Guarantee.

This mainly benefits new solar panels installations. See Solar panels.

The SEG scheme is not retrospective. Only electricity generated after that date will benefit.

Existing beneficiaries of the FiT will also, obviously, not benefit from the SEG too.

Boiler Upgrade Scheme

The government’s Renewable Heat Incentive was replaced with the Boiler Upgrade Scheme.

The Boiler Upgrade Scheme is mainly intended to encourage the installation of heat pumps in homes, but may also be suitable for some other technologies in small churches and church halls.

The amount payable was increased from £5,000 to £7,500 by the Prime Minister in his speech on 20th September 2023. It is a one-off grant, not a repayable loan.

Green loans

The Green Investment Group (in limited circumstances) and Triodos Bank may be able to offer finance.

Carbon Trust

The Carbon Trust may finance for energy-saving investment to UK businesses and other organisations, for which some churches may qualify – though the criteria are quite tight.

Diocesan loans

Where funding from other sources still falls short of a parish’s needs, the Diocese may be able to offer loans. These are on favourable terms including interest rates.

When applying for support for a Climate Action Project, please also seek advice from the Head of Environment and Sustainability before making an application.

See Diocesan loans.

Area grants or loans

Funds available to your Episcopal Area may enable a grant and/or a loan for urgent works such as boiler replacement.

Each Area will have slightly different criteria.

See Area grants and loans.

Parish trusts

Have you thought of clubbing together in your own deanery, or forming a cooperative with other parishes that you link to?

Where permitted by the purposes and articles of association of a trust, it may be possible to lend to a local project at a rate higher than the trust can earn on deposit, but lower than any rate at which the project could borrow.

For advice, contact the Diocese’s Trust Accountant. Where the London Diocesan Fund is a trustee, its consent will be required.

VAT

Repairs and alterations to listed buildings are in general subject to VAT at the standard rate of 20%.

However, the government’s approved Listed Places of Worship Grants Scheme (LPWGS) in effect refunds part of the VAT on repairs, and can include approved alterations to listed churches as well as repairs. This scheme remains open at least until 31 March 2025.

Installing certain energy-saving products, also known as ‘energy-saving materials’, has been charged VAT at the reduced rate of 5%, in respect of residential buildings. This includes insulation and draught stripping, and also renewable energy installations including solar panels and heat pumps, as well as controls for central heating and hot water systems. From April 2022 until March 2027, these products are to be zero rated. The list of eligible products has been extended, and eligibility criteria removed.

However, churches regrettably no longer benefit from this concession on their VAT. There is been no indication that this restriction will be lifted.

Fuel and power

For non-business charities including most churches (and for domestic purposes/residential premises), fuel and power are eligible for the reduced VAT rate of 5%.

When a customer changes supplier, the new supplier may often apply VAT at 20%, even though it was 5% previously. The information that a customer is a charity seems not to be shared between suppliers during the process of transfer. Churches should make their new supplier aware of this immediately after transfering.

Unless A VAT declaration form has been submitted, VAT at 20% will be charged if monthly electric consumption exceeds 1000 kWh, or gas consumption exceeds 4,397 kWh.

VAT declaration forms should be available from a supplier’s website, and can usually be found by searching the supplier’s name followed by “VAT Declaration Certificate”.

A detailed explanation is available here.

To discuss

To talk through any project and how to fund it, contact the Head of Environment and Sustainability, the Parish Property Support Team or your Archdeacon. Also contact the Diocese’s Fundraising Team.