When Etterbeek municipality set the goal to reach 100% carbon neutrality by 2050, Project Manager, Jean-François Maljean, committed himself to making this a reality. However, the misalignment between this bold vision and the available budget prompted Maljean to search for new ways of financing.
The challenge of traditional financing
Traditional grants and subsidies have long been the lifeblood of municipal projects, but they often fail to keep pace with the escalating costs and complexity of initiatives needed to combat climate change. This gap necessitates a more innovative approach to financing—one that can provide the necessary capital while also fostering a sense of community involvement and ownership.
Maljean explains candidly: “The subsidies and grants are simply not enough to reach our objective. Of course, there is the city budget funded by taxes, but raising taxes is not a very popular solution. We aim to keep them as low as possible and instead, utilise alternative sources of financing.”
The subsidies and grants are simply not enough to reach our objective.
Crowdlending as a creative solution
When the team decided to renovate a municipal swimming pool, they opted for a crowdlending scheme. Located in the Brussels-Capital Region of Belgium, Etterbeek is the first and so far, the only municipality in Belgium to implement this type of scheme.
Contrary to the better-known crowdfunding, crowdlending involves individuals lending money with the expectation of receiving their principal back, along with interest. Maljean breaks down what makes crowdlending a public project like this different from other investments: “Rather than investing your money with any bank that funds projects you are never even aware of, we propose investors to contribute to the energy renovation of their local swimming pool. For Etterbeek residents, it means their money is actually going toward something that benefits them – and they get the same return on their investment.” As some examples have shown, the return on investment through crowdlending may be even more attractive than that offered by banks.
For Etterbeek residents, it means their money is actually going toward something that benefits them...
The first hurdle he faced was the complete lack of an existing legal framework for public crowdlending. “Although crowdlending is popular in the private sector, Etterbeek is the first Belgian municipality to employ this funding scheme. There are a lot of reasons for this. Being a public authority, we are bound to public procurement and many other laws, so implementation is complicated.”
Despite the difficulties, the municipality was buoyed by the political backing of Etterbeek’s Mayor, Vincent De Wolf. Rather than convincing the mayor to get on board with the idea, it was actually De Wolf himself who brought the idea to the team and encouraged them to move the scheme forward.
As Maljean highlights, “Our mayor has been a driving force behind this initiative, providing unwavering support and championing the need for innovative financing methods to achieve our sustainability goals.”
They grouped together a team of legal experts to confirm the legality of public crowdlending. With this question answered, the municipality is currently looking to team up with a financial entity to develop the crowdlending platform. Once it’s ready to launch, they’ll kick off a campaign to attract small investors with interest rates in the same way a bank would.
Crowdlending cuts across goals
Crowdlending ticks several boxes on Etterbeek’s agenda. In addition to funding the swimming pool itself, the process of crowdlending democratises the funding process and makes sustainability a collective effort.
“Our goal is that the scheme not only enhances our infrastructure but also fosters a sense of ownership and pride. It’s all about creating a sustainable city in collaboration with residents.”
It’s all about creating a sustainable city in collaboration with residents.
The renovation of the swimming pool will contribute to climate adaptation as they serve as places of respite during heat waves to cope with extreme weather conditions. At the same time, energy-efficient renovations will lower emissions to align with the city’s mitigation goals.
A blueprint for Belgium and beyond
While Etterbeek may be the first to implement public crowdlending in Belgium, the scheme has already been tested and proven in other European cities. Their experiences and knowledge were shared with Maljean through the Horizon 2020 project Prospect+ . This EU-funded project is fostering creative solutions to address the hurdle of financing sustainable energy projects across Europe. Maljean worked with representatives of the KIK Cooperative in Croatia and visited Krizevci to learn about the practicalities of using this scheme. This gave him a chance to learn first-hand how to plan and implement similar projects.
So far over 150 cities and regions have joined the capacity building programme to learn from their peers about innovative financing schemes to implement sustainable energy projects. For Maljean, one of the biggest takeaways is the shift in perspective that comes with exposure to so many projects: “it opens your mind to the possibilities out there. Then you take that inspiration and see how well the legal framework in your own country is adapted or not.”
While the participants come from different countries, they are facing many of the same challenges and can draw inspiration from cities across Europe. The peer-to-peer learning activities are geared to enhance decision-making of public authorities and unlock their potential as leaders in sustainable energy.
“The mentorship from Prospect+ has been invaluable. Visiting Croatia and seeing their innovative approaches firsthand provided us with fresh perspectives and practical solutions that we could adapt to Etterbeek’s context. By sharing our journey, we hope to inspire others to explore crowdlending and other innovative financing strategies for their own sustainability efforts.”
This is why he decided to join another Learning Cycle where he will explore two more innovative financing instruments: Energy Performance Contracting and Internal Contracting. This time, he will work with mentors from Austria and France. He also participated in a Masterclass organised by the Prospect+ Team to introduce city representatives to various financing and funding opportunities. This ongoing engagement highlights Etterbeek’s commitment to pioneering sustainable energy solutions.
Prospect+ has launched a community of practice for anyone who would like to learn more about innovative financing instruments and examples of successful projects at their own pace on the online platform. For cities looking to share their expertise, Prospect+ is collecting contributions in an ongoing survey on other-than-subsidies funding options here.
Photo credit: Jaspers-Eyers Arcitectes, BAEB Architects (c)Georges De Kinder
